In its latest Consensus Forecasts published on Monday, the New Zealand Institute of Economic Research (NZIER) showed a downward revision to the growth outlook over the coming years, despite the stronger start.
Key takeaways
“The revisions reflect expectations of weaker activity across most sectors from 2023.“
“These headwinds include continued global supply chain disruptions as countries continue to grapple with COVID-19, the war in Ukraine and rising interest rates.”
“Households and businesses are starting to feel more downbeat.”
“Meanwhile, the inflation outlook has been revised up. This reflects expectations that high inflation will remain persistent in the New Zealand economy.
“Annual GDP growth is expected to ease to below 2% for the year to March 2024 before recovering slightly in the subsequent year. Surveyed economists forecast 2022-23 GDP expanding by 2.9% & 2023-24 +1.9%.
“With major central banks around the world highlighting their increased concern with inflation and embarking on monetary policy tightening, the interest rate outlook has again been revised up .
“Although the Reserve Bank of New Zealand was early in tightening monetary policy, as other central banks have followed suit, this has reduced the yield attractiveness of NZD – denominated assets. This has put downward pressure on the New Zealand dollar.”
This comes ahead of the GDP due from New Zealand this Thursday.
Market reaction
At the time of writing, NZD/USD is heavily sold-off into risk-aversion, as hotter US CPI triggered recession fears. The kiwi is down 0.62% on the day, trading at 0.6328.