New Zealand’s AA+ Credit Rating May Be Cut, S&P Says

January 12, 2009 by · Leave a Comment
Filed under: Currency News 

Looks like the global financial crisis is spreading to more stable regions of the world.  Lets hope today does not mark the entire theme of 2009.


New Zealand’s AA+ foreign-currency credit rating may be cut if the nation’s current account deficit and overseas debt begin to curb growth and investment, Standard & Poor’s said.

The rating company affirmed the rating, though revised the outlook to negative from stable, according to a statement today. The AAA local-currency rating is affirmed with a stable outlook.

New Zealand’s dollar fell to a four-week low after the statement, which adds to signs that investors may turn away from an economy that is in a prolonged recession. A report earlier today showed business confidence has slumped to a 34-year low and the government last month forecast widening budget deficits over the next five years.

“It’s not going to be easy for New Zealand,” said Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney. “They have a massive current account deficit and a sizeable budget deficit. These are two things that aren’t good to have in an environment when it’s a struggle to raise capital.”

New Zealand’s dollar fell to 56.45 U.S. cents at 2:40 p.m. in Wellington from 57.17 cents immediately before the S&P report and from 57.93 cents in late Asian trading yesterday.

Standard & Poor’s yesterday said it may cut Spain’s AAA sovereign rating, citing challenges facing the economy. On Jan. 9, S&P put Greece’s credit rating on watch for a possible downgrade and reduced the outlook on Ireland’s rating to negative from stable.

Australian Rating

Nations that have been downgraded from AAA previously include Japan, Sweden, Finland and Denmark. The rating company today affirmed Australia’s AAA rating.

“The negative outlook on the New Zealand foreign currency rating reflects the likelihood of a rating downgrade if external imbalances begin to pressure the country’s investment, growth, and fiscal performance,” S&P said.

Source: Bloomberg

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