"The drought will hit export volumes, particularly in Q2, but increasing export (dairy) prices are likely to more than offset this by the end of the year. At the same time, imports are likely to increase as the Canterbury rebuild continues to ramp up."
- Economists at Westpac
New Zealand's current account deficit shrank in the January-March period matching economists expectations as volumes and prices of dairy exports surged and the tourism sector performed well. The current account deficit narrowed to $NZ663 million in the Q1 from a revised $NZ 3.2 billion in the last quarter of 2012, Statistics New Zealand said Wednesday. For the 12-month period, the total current account deficit was NZ$10.08 billion, 4.8% of GDP, compared to expectations for a deficit of NZ$10.04 billion and 4.8% of GDP. The data appeared to have no major impact on the New Zealand Dollar's performance, which was traded at US79.87 cents immediately after data release.
Both the quarterly and the annual current account deficit benefited from a robust demand for New Zealand's diary products, the major commodity shipped overseas. However, the consequences of drought in the Q1 will probably start showing up in the April-June quarter, whereas imports are anticipated to resume their increase. The Treasury is predicting the deficit will expand to NZ$16.6 billion, or 6.5% of GDP, by 2017.
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