Bangkok--14 Jan--Standard & Poor's
Standard & Poor's Ratings Services today said that it had affirmed its 'AA+' foreign currency and 'AAA' local currency long-term ratings on New Zealand, and revised the outlook on the foreign currency rating to negative from stable. At the same time, Standard & Poor's maintained its stable outlook on the local currency rating, and affirmed its 'A-1+' short-term ratings on New Zealand and the ratings on the country's debt issues. The outlook revision on the foreign currency rating is motivated by our view of New Zealand's narrowing economic policy flexibility in light of the country's widening external imbalances, as evidenced by the sizeable current account deficit (about 8% of GDP in 2008).
"The negative outlook on the foreign currency rating reflects the likelihood of a rating downgrade if external imbalances begin to pressure the country's investment, growth, and fiscal performance," Standard & Poor's sovereign analyst Kyran Curry said.
The central government is forecasting fiscal deficits on a cash basis of 3.7% of GDP in 2009, 4.4% of GDP in 2010, and 5.6% of GDP in 2011. Although we view such deficits as not uncommon given the cyclical weakening of tax revenue and the countercyclical fiscal measures taken by the government, market confidence may wane until policymakers articulate a plan for medium-term fiscal consolidation.
Mr. Curry added: "New Zealand's next budget will, in our view, be a key indicator of the government's intent regarding medium-term expenditure cuts and reprioritizing of policy initiatives. A credible medium-term fiscal plan combined with an easing of New Zealand's external imbalances could result in the ratings stabilizing at the existing levels. Absent such developments, the foreign currency rating could be lowered."
Standard & Poor's today also affirmed its 'AA+/A-1+' foreign currency ratings, but revised the outlook on the long-term rating to negative from stable, on the following government-related entities: Housing New Zealand Corp., Housing New Zealand Ltd., New Plymouth District Council, Counties Manukau District Health Board, and Auckland District Health Board. The 'AAA/Stable/A-1+' local currency ratings were unchanged.
Ratings are statements of opinion, not statements of fact or recommendations to buy, hold, or sell any securities. Standard & Poor's (Australia) Pty. Ltd. does not hold an Australian financial services license under the Corporations Act 2001. Any rating and the information contained in any research report published by Standard & Poor's is of a general nature. It has been prepared without taking into account any recipient's particular financial needs, circumstances, and objectives. Therefore, a recipient should assess the appropriateness of such information to it before making an investment decision based on this information.
Complete ratings information is available to subscribers of RatingsDirect, the real-time Web-based source for Standard & Poor's credit ratings, research, and risk analysis, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; select your preferred country or region, then Ratings in the left navigation bar, followed by Find a Rating.
Media Contact:
David Wargin, New York (1) 212-438-1579, [email protected]
John Piecuch, Paris (33) 1 4420-6657, [email protected]
Analyst Contacts:
Kyran Curry, Melbourne (61) 3-9631-2082
Brendan Flynn, Melbourne (61) 3-9631-2042
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