March 20 (Reuters) – Credit ratings agency Fitch lowered New Zealand’s outlook to ‘Negative’ from ‘Stable’ on Friday, citing the South Pacific country’s increasing difficulty in reducing debt due to a delay in fiscal consolidation over the last few years.
New Zealand’s economic recovery has hobbled in the past few quarters, as tepid consumption and heightened uncertainty about U.S. trade policy and the global economic outlook weighed. Though growth in the economy has started to show early signs of an improvement, there remains plenty of spare capacity.
“Significant fiscal consolidation measures are likely to occur only after the 2026 election, adding uncertainty to the fiscal outlook,” Fitch said, maintaining New Zealand’s ratings at “AA+.” General elections are scheduled for November 7.
Fitch said the ongoing Iran war poses some risks to the country’s economy, given its substantial dependence on energy imports. On Thursday, official figures showed New Zealand’s GDP grew in the fourth quarter but was weaker than expected.
While New Zealand’s direct links to the Middle East are small, inflationary effects and broader global weakening could have a negative impact, the rating agency said.
Finance Minister Nicola Willis said on Monday the country’s treasury department has forecast that inflation will rise to 3.7% if the Iran war lasts through the year.
(Reporting by Unnamalai L in Bengaluru; Editing by Sahal Muhammed and Mrigank Dhaniwala)
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