Economists have revised their forecast for New Zealand’s export growth to reflect global economic uncertainty and expectations the NZ dollar will keep its strength, according to the NZ Institute of Economic Research (NZIER).
Forecasters now expect exports to grow 3.2% (old forecast 4%) in the March 2012 year and 2.8% in (old forecast 3.4%) 2013.
The outlook is resilient despite the latest downward revisions, the NZIER says.
Economists expect the NZ dollar to stay higher for longer compared to the June survey. The higher exchange rate will reduce New Zealand’s export competitiveness.
Exchange rate forecasts have been revised up by around 5-6% for the 2012 and 2013 March years. The TWI (trade weighted index) will average 71.1 over the next two years, before easing back a little to 68.8 in the March 2014 year.
The NZ economy is expected to stay resilient despite global risks. Economists believe the economy is set to recover, in part due to reconstruction of Canterbury. Global fears do not appear to have impacted on New Zealand economists’ expectations much as yet.
Economists have revised upwards their forecast for the NZ economy for the next two years, according to NZIER Consensus Forecasts Survey.
The NZ economy’s growth will accelerate from 1.5% in the year ending March 2011 to 2.6% in 2012 and 3.7% in 2013. The Canterbury reconstruction will be the major driver, with a more modest recovery elsewhere. Economists are however uncertain on the actual timing and speed of this reconstruction.
Surveyed economists expect inflation to average 2.7% over the next three years, near the top of the Reserve Bank of NZ (RBNZ) target band. But global risks mean rate hikes are likely to be from early 2012.
Interest rates will trend higher over the next three years as a consequence. Economists forecast the 90 day bank bill rate to rise from 3% in the March 2012 year to 4.8% in the year to March 2014, an increase of 1.8 percentage points. These forecasts suggest the first OCR hike by the RBNZ will be in early 2012.
Forecasters expect NZ to register a current account deficit of $8.6 billion in 2012, deteriorating to $13.7 billion by 2014. A widening current account deficit reflects insufficient domestic savings to fund investment in the economy. This can be a source of economic vulnerability when global investment appetite sours.
More at NZIER's website