New Zealand’s economy to see subdued growth for the two years ahead – NZIER

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Ahead of New Zealand’s (NZ) official Gross Domestic Product (GDP) data release this week, the New Zealand Institute of Economic Research (NZIER) is out with its Consensus Forecasts of the country’s growth and inflation numbers.

Key takeaways

Annual average GDP growth is forecast to slow to 0.4 percent in the year to March 2024 before recovering to just 1.1 percent in 2025.

Higher interest rates are starting to dampen demand as the impact of previous increases in the Reserve Bank’s Official Cash rate (OCR) is transmitting through to the broader economy.

Added to this is the downside risk from weaker demand for New Zealand exports, primarily due to the weaker growth outlook in China.

Offsetting these are the upside risks from the strong recovery in net migration, which will likely support demand over the coming years.

The inflation outlook for the year ending March 2024 has been revised higher. Annual CPI inflation is forecast to ease to 4.3 percent before decreasing to 2.4 percent in 2025.

Market reaction

At the time of writing, NZD/USD is paring back gain on the grim outlook for the NZ economy, adding 0.15% on the day to trade at 0.5908, down from intraday highs of 0.5919.