New Zealand’s sovereign credit rating has been raised by Standard & Poor’s Global Ratings (S&P), making it the first developed nation with investment-grade debt to get an upgrade since the outbreak of the COVID-19 pandemic.
S&P yesterday 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.
“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.”
The nation enjoyed a V-shaped recovery from a first-half recession after New Zealand 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 GDP return to pre-COVID levels in the third quarter of last year.
The government expects net debt to peak at 52.6 percent of GDP in 2023 and fall to about 37 percent 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.
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