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Fitch Ratings cuts NZ outlook, warns of downgrade

Published 07/16/2009, 12:21 AM
Updated 07/16/2009, 12:24 AM

HONG KONG, July 16 (Reuters) - Fitch Ratings cut New Zealand's rating outlook to "negative" from "stable", highlighting risks to the medium-term growth outlook in the backdrop of a large current account gap and rising external debt.

It affirmed its AA-plus rating, which is one notch below the top rating.

"New Zealand could fall into a low-growth trap as foreigners demand higher returns as an incentive to continue lending to New Zealand so it can consume more than it produces, gradually eroding New Zealand's fundamental credit strengths, including strong public finances, and rendering it more vulnerable to future adverse shocks," it said in a statement.

Fitch said the rating outlook covered a 12-24 month time horizon and implied a greater than 50 percent chance the rating would be downgraded. (Reporting by Umesh Desai; Editing by Chris Lewis)

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