Fitch cuts New Zealand rating outlook to negative amid debt concerns
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FILE PHOTO: People walk alongside the sea in Wellington, New Zealand August 3, 2023. REUTERS/Amanda Perobelli/File Photo
March 20 (Reuters) - Credit ratings agency Fitch lowered New Zealand's outlook to "negative" from "stable" on Friday, citing the South Pacific country's increasing difficulty reducing debt due to a delay in fiscal consolidation over the last few years.
New Zealand's economic recovery has stumbled in the past few quarters, as tepid consumption and heightened uncertainty about U.S. trade policy and the global economic outlook weighed. Though economic growth has started to show signs of improvement, there remains plenty of spare capacity.
"Significant fiscal consolidation measures are likely to occur only after the 2026 election, adding uncertainty to the fiscal outlook," Fitch said, maintaining New Zealand's ratings at "AA+." General elections are scheduled for November 7.
Fitch said the Iran war poses risks to the country's economy, given its dependence on energy imports. On Thursday, official figures showed New Zealand's GDP grew in the fourth quarter but was weaker than expected.
While New Zealand's direct links to the Middle East are small, inflationary effects and broader global weakening could have a negative impact, the rating agency said.
Finance Minister Nicola Willis said in a statement that the negative outlook is a reminder of why fiscal discipline is important.
“The Government remains committed to achieving its three fiscal goals – reducing spending as a proportion of GDP, returning the headline operating balance measure to surplus and bending the debt curve down," Willis said.
The country's Treasury has forecast that inflation will rise to 3.7% if the Iran war lasts through the year.
(Reporting by Unnamalai L in Bengaluru and Lucy Craymer in Wellington; Editing by Sahal Muhammed, Mrigank Dhaniwala, Rod Nickel)
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