Deficit to Widen After Quake
March 18, 2011 New Zealand Finance
New Zealand has been hard hit by its recent earthquake, and is expected to see some economic ill effects from the associated costs.
New Zealand will have to wait an extra year before returning to a budgetary surplus, and will have to endure a further widening of its deficit. The announcement was made by the New Zealand Minister of Finance Bill English while speaking at the ANZ Capital Markets Conference on March 17th.
In order to cover the repairs and arising costs from the recent Christchurch earthquake the government will have to resort to much greater levels of spending, raising the national budget deficit to approximately 8 percent of GDP, or a level of NZD 16 billion. The Minister stated that the country is not expected to see a budgetary surplus until 2016.
Bill English remained optimistic, saying that the national economy will experience a pick up after the first quarter of the year. Even with an initial growth drop in the first quarter, the country is expected to see an overall GDP increase for the 2011 year. The Minister made mention of the fact that international credit rating agencies were currently reevaluating the country’s economic outlook after the quake, but did not comment on the anticipated outcome.
Bill English concluded his speech on a note of optimism, saying “…our economy has the capacity to absorb the impact of the quake and I am optimistic about its potential once the recovery starts to kick in.”
Photo by Shazster