Economists lower track of NZ economic growth, see subdued inflation

Monday 18th June 2012

Economists have trimmed their forecasts for economic growth over the next two years, reflecting “anaemic” global demand, a subdued local economy and delays in the rebuild of Canterbury, according to the NZIER Consensus Forecasts.

The survey shows economists now forecast annual growth in the year ended March 31 was 1.2 percent, down from 1.8 percent predicted in the March survey. Growth in the March 2013 year was cut to 2.1 percent from 2.7 percent and for 2014 was lowered to 3.1 percent from 3.2 percent.

“The recovery is now expected to be much slower,” NZIER said. “Growth forecasts have been revised downwards for a third successive survey. The main drivers are a delayed Canterbury rebuild and a worsening global situation.”

The survey is out three days before Statistics New Zealand releases gross domestic product for the first quarter, expected to show quarterly growth picked up to 0.5 percent for an annual pace of 1.3 percent. NZIER said there are “many risks to the outlook” with consumer demand weak, exporters still grappling with a high kiwi dollar and low demand and the government tightening its fiscal belt.

The survey shows a lower track for growth in exports and imports through 2014 and the current account deficit is seen ballooning out to $12.6 billion in the March 2013 year from a previous forecast of $11.2 billion, and widening to $13.9 billion in 2014 from $13.2 billion.

Unemployment will take longer to abate, based on the latest forecasts. The government operating balance is seen as a deficit of $7.8 billion in the year ending March 31, 2013, from a previous forecast of $5.6 billion, falling to a $3 billion deficit in 2014, from an earlier estimate of $2.2 billion.

The track for both the trade weighted index and the 90-day bank bills are lower in the latest survey, with the TWI seen to average 71 in the year to March 2014 from 72 previously, and the 90-day bills at 3.3 percent from 3.8 percent.

NZIER says the TWI will remain elevated because of the worsening global situation, especially Europe’s debt crisis. “Of further concern are slowdowns amongst New Zealand’s key trading partners like China and Australia,” it said.

Economists kept their inflation forecasts largely unchanged from March to average 2.1 percent over the next three years, keeping within the central bank’s 1 percent-to-3 percent target range.

BusinessDesk.co.nz

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