Statistics New Zealand figures showed the seasonally adjusted current account deficit - the difference between what New Zealand earns and spends overseas - was $3.5 billion in March, about $450 million larger than expected.
The investment account deficit was $3.6 billion in March compared with a deficit of $2.9 billion in the corresponding month last year.
A slowdown of the global economy, still concentrated in the United States, hurt income from overseas subsidiaries of New Zealand companies.
Surprisingly, the income foreign direct investors earned from their New Zealand subsidiaries rose in the quarter from $1.89 billion in December to $2.07 billion in March.
The large investment income deficit is dwarfing the benefits of the higher terms of trade.
ASB chief economist Nick Tuffley told the Otago Daily Times the recent benefits from the dairy industry payouts would be increasingly offset by higher bills for both oil imports and debt servicing.
"Nevertheless, we see scope for the current account deficit to fall below 7% of GDP later in 2008."
The slight fall of the deficit as a percentage of GDP - from 7.9% to 7.8% - was seen as a sign of good news by economists polled by the ODT.
However, ANZ-National Bank chief economist Cameron Bagrie said although the percentage was moving in the right direction, the size of the deficit still left the country vulnerable.
"The altered credit environment means countries with large current account deficits will become more of a focus,like Iceland and the US.
"A slowing economy, falling house prices, less fiscal headroom given announced tax cuts and a stubbornly high external deficit is not a great mix in that type of environment.
"While we continue to look for improvements in the current account deficit over coming quarters, as the slowdown in domestic demand sees import growth reduce, the process looks like it could potentially be a slow grind."
The focus this morning will be on the March GDP data.
Economists said that based on the current account deficit numbers, there was a downside risk to the -0.3% consensus expectation of a fall in economic activity.
