"Unlike the rest of the world you've got very strong domestic demand. You've got business investment, you've got consumption then housing. That's a set of numbers the rest of the world dreams of."
- TD Securities
Current account balance of New Zealand swung into the red territory in the second quarter of this year, being that exports of dairy products and other commodities declined. The deficit reached $1.1 billion, comparing to the surplus of $1.47 billion a quarter ago. Year-on-year, the deficit grew to $5.8 billion, which accounts to 2.5% of country's GDP. As analysts expected the current account balance to be slightly better than reported data, it raises concerns about economic perspectives of New Zealand. Moreover, last Thursday the Reserve bank of New Zealand decided to keep the main interest rate unchanged at 3.5% on fears that the economy of the country will struggle to keep momentum in the medium-term.
Economic growth in New Zealand reached 0.7% in the Q2, calculated quarter-on-quarter. On the annual basis the country's GDP added as much as 3.9%, the largest gain in ten years. The country experienced the strongest immigration in 11 years, while the government invested funds to rebuild the earthquake-damaged Christchurch. Moreover, weakening national currency will help exports to start a recovery. Alongside, the Reserve Bank of New Zealand expects the pace of growth to decrease slightly next year, as the economy may rise 3.2% by March of 2015. When publishing its next year's forecasts, the RBNZ underlined that interest rates will not be raised at least until the second quarter of 2015.
© Dukascopy Bank SA