RTTNews - Fitch Ratings on Thursday revised New Zealand's long-term sovereign credit rating outlook to negative from stable, citing concerns regarding the medium-term growth outlook for the country.
The rating agency affirmed New Zealand's Long-term foreign currency Issuer Default Rating at 'AA+', Long-term local currency IDR at 'AAA', Short-term foreign currency rating at 'F1+' and the Country Ceiling at 'AAA'.
Despite the recession, the current account deficit remains large and is projected to remain above the level necessary to stabilize and reduce New Zealand's net foreign liabilities, Fitch said.
Fitch noted that a stronger fiscal adjustment than currently planned may be required to raise national savings and reduce the current account deficit, as well as structural reforms to improve productivity.
New Zealand's ratings have been affirmed reflecting its strong credit fundamentals, notably a credible commitment to low inflation, strong public finances and track record of policy and structural adjustment.
New Zealand could fall into a low-growth trap as foreigners demand higher returns to incentivise them to continue to lend to New Zealand so it can consume more than it produces, gradually eroding New Zealand's fundamental credit strengths, including strong public finances, and rendering it more vulnerable to future adverse shocks, said Ai Ling Ngiam, director in the agency's Asia-Pacific sovereign team.
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