S&P Global Ratings, in its latest sovereign credit report on New Zealand (NZ), affirmed the economy’s AA rating and maintained a positive outlook.

Key takeaways

NZ fundamentals are strong, hence a positive outlook.

Fiscal position should strengthen after the COVID-19 outbreak subsides.

Estimate NZ economy will contract 2.4% in fiscal 2020 before growing 1.7% in fiscal 2021 and 4.4% in fiscal 2022.

We believe NZ economy is in recession, and the government’s fiscal position is weakening substantially.

NZD/USD reaction

The recovery in NZD/USD from a four-day low of 0.6008 remains safe and sound, with the further upside likely on positive S&P headlines. Meanwhile, NZ PM Jacinda Ardern’s invite to Australia’s National Cabinet on Tuesday also renders NZD-positive.