New Zealand 2021 Budget Deficit Much Smaller Than Forecast
(Bloomberg) -- New Zealand posted a much smaller budget deficit than forecast for the 2020-21 fiscal year as economic growth rebounded strongly from last year’s recession.
The final deficit for the year to June 30 was NZ$4.6 billion ($3.2 billion), some NZ$10.6 billion less than forecast in the May budget and down from a NZ$23.1 billion deficit in 2020, according to financial statements published by the Treasury Department Tuesday in Wellington. Net debt was 30.1% of gross domestic product compared with the 34% forecast in May.
“On almost every indicator the accounts show that the New Zealand economy has performed better than forecast,” Finance Minister Grant Robertson said. “It shows a strong rebound from the first lockdown in 2020, and bodes well for emerging from the current outbreak.”
New Zealand’s initial success in eliminating Covid-19 from the community last year allowed its economy to stage a V-shaped recovery, boosting government tax revenues. However, the country is now battling an outbreak of the delta variant that required a three-week nationwide lockdown in August. Restrictions remain in place in largest city Auckland.
The government “may be a tad optimistic in assuming that the economy will bounce back with the same zeal it did back in 2020,” said Stephen Toplis, head of research at Bank of New Zealand in Wellington. Still, with net debt relatively low compared to other advanced economies, “the government will feel that it has plenty of capacity to continue supporting the economy if needs be,” he said.
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