8 Jul 2014
Fitch keeps New Zealand's rating at AA+, revises outlook to positive
FXStreet (Łódź) - Fitch Ratings affirmed New Zealand's sovereign credit rating at AA+ on Tuesday, revising the country's outlook to positive from stable, due to the positive effects of fiscal consolidation efforts.
According to the official release: "Fiscal consolidation is strengthening the resilience of New Zealand's sovereign credit profile. Nonetheless, vulnerabilities remain, primarily related to high net external debt and strong commodity dependence. New Zealand remains heavily exposed to developments elsewhere, notably in China and Australia."
"The authorities have a credible plan to lift the fiscal surplus in the years ahead and reduce net core Crown public debt to 20% of GDP by FY20. This would approach the level of 18.1% in 2003, the year Fitch previously upgraded the rating to 'AA+'."
"The macroeconomic record and prospects are supportive, with real GDP growth at 2.7% in 2013, and expected to rise to 3.8% in 2014 on the back of the reconstruction efforts in Canterbury, a local housing boom, and recently moderated, but still elevated dairy prices."
"Average inflation of 2.1% is lower than the 'AA' peer median of 2.7% and less volatile, although strong real GDP growth also brings challenges for policy makers, including a build-up in inflationary expectations that has prompted the Reserve Bank of New Zealand to start hiking the policy rate in March 2014."
"New Zealand's economic policy framework, business environment and standards of governance rank among the world's strongest from a credit perspective, and warrant high-grade sovereign ratings. The sovereign has no history of debt default."
"The persistent current account deficit, the need for foreign capital and net external indebtedness are longstanding weaknesses of the sovereign credit. These weaknesses are expected to persist, since the fiscal stance alone cannot credibly plug New Zealand's savings-investment gap."
"Household debt at 147% of disposable income at end-2013 is high, but banks are relatively strong on a stand-alone basis and are largely foreign-owned, limiting the contingent liabilities of the sovereign to support the system in the event of need."
According to the official release: "Fiscal consolidation is strengthening the resilience of New Zealand's sovereign credit profile. Nonetheless, vulnerabilities remain, primarily related to high net external debt and strong commodity dependence. New Zealand remains heavily exposed to developments elsewhere, notably in China and Australia."
"The authorities have a credible plan to lift the fiscal surplus in the years ahead and reduce net core Crown public debt to 20% of GDP by FY20. This would approach the level of 18.1% in 2003, the year Fitch previously upgraded the rating to 'AA+'."
"The macroeconomic record and prospects are supportive, with real GDP growth at 2.7% in 2013, and expected to rise to 3.8% in 2014 on the back of the reconstruction efforts in Canterbury, a local housing boom, and recently moderated, but still elevated dairy prices."
"Average inflation of 2.1% is lower than the 'AA' peer median of 2.7% and less volatile, although strong real GDP growth also brings challenges for policy makers, including a build-up in inflationary expectations that has prompted the Reserve Bank of New Zealand to start hiking the policy rate in March 2014."
"New Zealand's economic policy framework, business environment and standards of governance rank among the world's strongest from a credit perspective, and warrant high-grade sovereign ratings. The sovereign has no history of debt default."
"The persistent current account deficit, the need for foreign capital and net external indebtedness are longstanding weaknesses of the sovereign credit. These weaknesses are expected to persist, since the fiscal stance alone cannot credibly plug New Zealand's savings-investment gap."
"Household debt at 147% of disposable income at end-2013 is high, but banks are relatively strong on a stand-alone basis and are largely foreign-owned, limiting the contingent liabilities of the sovereign to support the system in the event of need."