New Zealand's annual current account deficit has widened from 3.3% to 3.6% of gross domestic product (GDP), largely from the decline in dairy exports during the past year.
While the 0.3% decline for the quarter to March was softened by a decline in oil imports during that period, and positives from hosting the Cricket World Cup, those are not likely to be repeated this quarter, and weakness in dairy pricing continues.
Economists are picking the deficit to grow to near 5% of GDP, by the end of the year.
New Zealand's annual current account deficit was $8.6billion, or 3.6% of GDP, for the year ended March 2015, compared with a deficit of $7.8billion, or 3.3% of GDP for the year ended December, Statistics New Zealand (SNZ) data revealed yesterday.
SNZ international statistics manager Jason Attewell said the larger annual current account balance was mainly due to a fall in exports of goods, driven by falling dairy prices during the past year.
A deficit in the current account means New Zealand's earnings from the rest of the world were less than New Zealand's overseas expenditure.
ANZ senior economist Philip Borkin noted that while New Zealand recorded a quarterly, unadjusted, current account surplus of $662million for the first quarter, which was larger than median consensus expectations, it was not enough to stop the annual deficit widening to 3.6% of GDP, which was an 18-month high.
''New Zealand's current account deficit is not large by its own historical standards, but the trajectory is more concerning,'' he said.
Because of pending falls in the terms of trade, with weaker export prices and a bounce in oil prices, Mr Borkin expected the current account deficit widening towards 5% of GDP by the end of this year.
''The risk is skewed towards further widening beyond that,'' Mr Borkin said.
ASB rural economist Nathan Penny said in the short term he expected the current account deficit to widen again, following a rebound in oil prices and continued weakness in dairy prices.
''We currently expect the current account deficit to settle near 5% of GDP,'' he said.
