Bank of America ranks N.Z. 58th

Press, 27 December 1985, Page 12

Bank of America ranks N.Z. 58th

By

JOHN HUTCHISON

In a ranking of the degree of risk to foreign investors doing business in 100 countries, where would New Zealand stand? The Bank of America has tracked the economies of the 100 with a complex formula called its “country risk monitor 3 ’ and puts New Zealand 58th — up from 80th in the four years from 1981 to 1984 and up sharply from 71st, the 1983 ranking. “Quite an improvement,” said Mr Robert Heller, senior vice-president and director of international economic research for the huge bank, which has offices, in 76 countries. : Topping the bank’s recent ratings is oil-soaked Brunei, the tiny neighbour of Indonesia and Malaysia. At the bottom of the list is poverty-ridden Sudan. Exactly in the middle, not far above New Zealand, the United States stands at 51st.

The ratings were from a “combined index," calculated from eight major classes of data, Mr Heller said.

Of them, three concerned New Zealand’s total debt service.

When positioned over total exports the survey placed New Zealand 48th among the 100 nations. The same factor, divided by gross domestic product, put New Zealand in 64th place, and when it was divided by central bank reserves, in 48th.

Other ratios used, and the resulting standards which allowed the combined index to establish New Zealand at 58th, over all, were as follows:

1 Reserves divided by imEorts, 60th- exports divided y gross domestic product, 37th; current accounts balance over gross domestic Eroduct, 78th; Government udget divided by gross, domestic product, 69th; per capita gross domestic product divided by gross domestic product of the United States, 25th.

The director of world information services for the bank, Mr Emanuel Frenkel, said in effect,' the ranking was meant to measure each

country’s capacity to withstand economic shock.

Hundreds of officers in the huge bank, based in San Francisco, use the analyses in forming investment decisions, and the bank has recently begun to sell subscriptions to all or parts of the studies to private interests and financial organisations throughout the world.

The publications are revised twice annually, in March and September. Mr Julian Gaspar, an economist for Bank of America, who devotes particular attention to New Zealand, said the debt service capacity of the country and the general outlook in New Zealand look “very encouraging.”

Even as Mr Heller was predicting in a press conference that the United States economy would be “fragile” in 1986, far below forecasts of the Reagan administration, Mr Gaspar said: “As a place for investment, New Zealand’s future looks brighter than in the past, as a result of the Prime Minister’s new policies.” Mr Gaspar attributed im-

proved prospects to the move away from subsidies and the trend toward liberalisation of marketing systems. He predicted shortterm inflation problems, followed by greater fiscal stability, and promise of growth. Mr Gaspar was optimistic about what the likely reception of foreign banks trading in New Zealand would be. He believed this would result in enlarged financial services, with increased competition and lower cost of funds.

His somewhat upbeat appraisal of the New Zealand economic future comes in ,the face of a less cheerful global outlook from the bank. Increasing economic tensions and slackening growth are likely for 1986, 'the bank predicts. Among world-wide economic strains it listed further , raging inflation in Latin America, crushing deficit spending in many countries, excessive external debts and increasing protectionist trends. Demand in the United States for imported Eroducts will be reduced, a ank forecast said.