New Zealand Economic Forecast

New Zealand Economic Outlook

June 21, 2022

The economy shrank in sequential terms in the first quarter of this year. The spread of the Omicron variant and low travel activity owing to border restrictions were behind the poor reading. Available data paints a mixed picture for Q2. Electronic card transactions expanded solidly in April and May, likely supported by the easing of restrictions. Meanwhile, the reopening of borders facilitated the jump in border crossings in April. That said, the manufacturing PMI averaged lower in April compared to the first quarter. Moreover, consumer sentiment remained strongly downbeat in April-May amid elevated price pressures and rising interest rates. Additionally, business sentiment remained deeply pessimistic in the same period, signaling weak investment activity. In other news, the Central Bank recently lifted dividend restrictions on banks as the country’s monetary stance normalizes.

New Zealand Economic Growth

The economy should expand at a softer pace this year than in 2021, partially due to a less favorable base effect. A tight labor market, pent-up spending and the recovery of the tourism industry amid the reopening of borders will sustain growth. That said, rising interest rates, higher energy prices and global supply constraints will limit the pace of expansion. FocusEconomics panelists project the economy to grow 2.6% in 2022, which is down 0.3 percentage points from last month’s estimate, and 2.5% in 2023.

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New Zealand Facts

Value Change Date
Bond Yield1.671.20 %Dec 30
Exchange Rate0.67-1.69 %Jan 01

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