ANNEX I New Zealand—Medium-Term Scenario
ANNEX II New Zealand—External Vulnerability Assessment
This Annex updates the staff’s assessment of New Zealand’s external vulnerability provided in SM/99/196 (August 3,1999). On the whole, the assessment remains broadly unchanged. That is, while the extent of external imbalances remains very large, suggesting a high degree of external vulnerability to sudden changes in investor sentiment, several mitigating factors, including evidence from recent large movements in the exchange rate, lead the staff to conclude that the external risks remain manageable. However, the staff notes that some of the mitigating factors—such as the relatively benign currency and maturity composition of the debt—have deteriorated somewhat since the previous Article IV consultation, but that others—such as increases in debt to related parties—have helped to offset this somewhat.
The Annex is structured as follows: Section A decomposes New Zealand’s gross external debt along sectoral, currency denomination, maturity and related party lines. Section B reports on the extent to which external exposures are hedged. Section C looks at the balance sheets of the household, banking and government sectors. Section D covers some remaining factors that come into play in assessing New Zealand’s external vulnerability. Section E concludes.