New Zealand’s sovereign credit rating has been raised by Standard & Poor’s Global Ratings, making it the first developed nation with investment-grade debt to get an upgrade since the outbreak of the coronavirus pandemic. The New Zealand dollar rose.
S&P lifted its foreign currency rating to AA+ from AA and its local currency rating to AAA from AA+, citing New Zealand’s faster-than-expected economic recovery. The outlook is stable, S&P said in a statement on Monday.
“New Zealand is recovering quicker than most advanced economies after the Covid-19 pandemic and subsequent government lockdown delivered a severe economic and fiscal shock to the country,” S&P said. “While downside risks persist, such as another outbreak, we expect New Zealand’s fiscal indicators to recover during the next few years.”
New Zealand enjoyed a V-shaped recovery from a first-half recession after Prime Minister Jacinda Ardern’s aggressive elimination strategy allowed a lifting of restrictions and resumption of economic activity. Massive fiscal and monetary stimulus also helped gross domestic product return to pre-Covid levels in the third quarter of 2020.
The kiwi dollar rose after S&P raised its rating back to levels last seen in 2011. It bought 73.28 U.S. cents at 2:55 p.m. in Wellington from 73.07 cents before the release.
The government expects net debt to peak at 52.6% of GDP in 2023 and fall to about 37% by 2035.
“Reflecting substantial fiscal support, New Zealand’s net general government debt is much higher than in the past but remains lower than most of its peers,” S&P said. “We believe that New Zealand’s relatively better management of the pandemic means that its credit metrics are in a good position to weather potential deteriorations associated with further negative pressures, including from a possible weakening of the real estate market, at its current rating level.”
S&P downgraded the sovereign rating to AA in September 2011, and has had it on a positive outlook since January 2019.
(Updates currency in fifth paragraph)
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