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NZ annual current account gap shrinks less than expected

Thursday 26th June 2008

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New Zealand's annual current account deficit shrank less than expected in the first quarter on payments to overseas investors and a drop on returns from offshore assets.

The deficit contracted to NZ$13.79 billion in the 12 months ended March 31 from NZ$13.84 billion in the 2007 calendar year, Statistics New Zealand said today. Economists on average expected a deficit of NZ$13.2 billion.

Increased payments to overseas investors, who have been lured to the high yields on the nation's debt securities, outstripped gains from increased prices for exports of dairy products. The goods and services balance improved to -0.8% of GDP from -1.1% while the net income deficit widened to -7.4% from -7.1%.

"The data is a reminder of the significantly imbalanced state of the New Zealand economy," said Shamubeel Eaqub, director of investment research at Goldman Sachs JBWere (NZ). The figures suggest downside risk to the firm's first-quarter economic growth forecast, he said.

The deficit amounted to 7.8% of gross domestic product, down from 7.9% in the previous period though greater than the 7.5% economists predicted.

The current account deficit is the broadest measure of trade and investment flows.

By Jonathan Underhill

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