Deficit up $891M in 1982

Press, 11 February 1983, Page 3

Deficit up $891M in 1982

PA Wellington The Reserve Bank has reported a current account deficit of $1845 million for the calendar year 1982. almost double the $953.7 million deficit in 1981.

The deficits for 1980 and 1979 were 5549.2 M and $536.7M, respectively. The bank noted a "significant deterioration” in the current account deficit for December. 1982 (S2B6M) compared with November. 1982 s S97M and December. 1981’s SB9M.

In spite of this, the December quarter deficit of $494M was lower than the September quarter’s S6OOM. the bank said. The shortfall in the December, 1981, quarter was $397M. The bank’s statistics record New Zealand’s transactions with the rest of the world on a cash basis.

Broadly they show the effect of the world recession on export receipts, with lower returns for meat and wool, a slowing of import payments, increased overseas borrowing by the Government and the private sector, and higher Government interest payments on overseas debt.

Export receipts of $492M for December, 1982, were down 9 per cent on December, 1981, mainly because meat receipts fell 35 per cent on December, 1981, after erratic returns from sales to Iran. Other main contributors to the sharp December drop were forest products (down 32 per cent) and wool (down 10 per cent). Import payments in December were 9 per cent higher than in December, 1981, most of the increase being for mineral fuel oils and transport equipment.

The December deficit on invisible transactions was $2l IM, up nearly SB4M on December, 1981, mainly because of a 44 per cent rise in invisible payments boosted by high Government interest payments on overseas debt. “This item can vary considerably from month to month since the interest on some large loans is paid only six-monthly,” the bank said. A big ’inflow of private capital receipts in December resulted in a record net capital inflow of S2IBM. For the December, 1982, quarter, a drop in import payments more than offset the 6 per cent fall in export receipts, a marginal rise in the trade balance (to S44M) compared with, the September quarter. - The quarterly deficit on invisible transactions was down S94M and invisible pay-

ments showed a slight decline.

Compared with the December. 1981. quarter, the slower growth of imports resulted in payments being only 5 per cent higher while export receipts, mainly because of higher meat receipts in November and the relatively high growth rate of receipts from manufactured exports throughout the quarter (up 25 per cent on a year ago), were 9 per cent higher. For the year ended December, 1982, export receipts of $6857M showed the effect of the world recession and were only 5 per cent higher than the previous year’s. Exports of meat and wool were the worst affected, receipts declining 6 and 3 per cent, respectively, during the year. Other primary products (horticultural products, fish, etc.) and manufactured exports showed increases of 24 and 17 per cent, respectively. Import payments, whose rate of increase earlier in the year had exceeded 20 per cent, rose more slowly in the latter part of 1982 as domestic activity slowed and financial conditions tightened. Import payments for the year ended December, 1982. at $6593M. were up 15 per cent on the previous year. Invisible payments at $3863M rose 19 per cent and are still rising faster than invisible receipts. The annual invisible deficit is now about S2IOOM. Increased overseas borrowing by both the Government and private sectors during the last year brought a big net capital inflow (up $1851M). A substantial contribution came from the private capital account (up SB6BM) which in the previous year had been very small (up $3B million). Large project financing requirements had a. big influence on the private capital inflow. Tight domestic financial conditions in the latter part of the year, plus falling nominal interest rates overseas also had some influence.

These capital inflows helped raise official overseas reserves to SII7OM at the end of December, 1982, compared with $965M a year earlier.