Current Account Deficit Approaches 9% Of GDP

The Q4 current account deficit came in larger than expected at $9.46bn but narrower than Q3’s upwardly revised $11.4bn deficit. But seasonally adjusted it widened to $8.5bn from $7.1bn. The year to date deficit was 8.9% of GDP up from 8.5% (revised from 7.9%), the highest since the series began in 1988 and 2.9pp wider than Q4 2022.

• While NZ is unlikely to face problems financing its large current account deficit, renewed concerns around a global recession this year could leave NZD more sensitive to external developments compared to other currencies, where current account balances are in a healthier position. According to the IMF NZ and Cyprus had the largest current account deficits in the OECD in 2022.
• The widening of the NZ deficit was due to a $10bn increase in the trade deficit and +$2.7bn in the income deficit.
• Imports of goods and services rose 25.8% y/y, driven by travel, transport, petrol and machinery. Exports increased 16.8% y/y with dairy, meat and tourism the main contributors.