Fitch Ratings confirms New Zealand’s rating at AA+, maintaining stable outlook
Date
8/21/2024 5:48:23 AM
(MENAFN) On Tuesday, Fitch Ratings confirmed New Zealand’s long-term foreign currency issuer default rating at AA+ with a stable outlook. The agency highlighted that New Zealand’s strong and affluent economy, along with its robust governance standards and policy framework, underpins this high rating. However, these positive factors are weighed against certain macro-financial risks, including high household debt and a substantial current account deficit.
Fitch noted that New Zealand’s economic growth is expected to decelerate significantly in 2024, with a forecast real GDP growth rate of just 0.1 percent, down from 0.8 percent in the previous year. This slowdown is attributed to the delayed effects of tighter monetary policy, which have resulted in increased debt servicing costs, a softening labor market, and weak consumer sentiment amid sluggish house prices.
In response to evolving economic conditions, the Reserve Bank of New Zealand reduced the official cash rate by 25 basis points to 5.5 percent on August 13. The central bank had been among the first in the developed world to tighten monetary policy starting in October 2021. Fitch anticipates further reductions, projecting the cash rate to decrease to 3.8 percent by the end of next year and to 3 percent by the end of 2026.
Despite a decrease in annual consumer inflation to 3.3 percent in the second quarter of this year, down from a peak of 7.3 percent in the same period of 2022, the labor market has been showing signs of cooling. Unemployment edged up to 4.6 percent during the April-June period, reflecting broader economic challenges.
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