NZ Economy To Expand More Than Initially Thought Next 2 Years, Economists Say
2011-06-20 15:10:57
New Zealand's economy is likely to recover in coming months and grow faster than previously expected in next two years, despite a possible contraction in the March quarter, results of the New Zealand Institute of Economic Research (NZIER) Consensus Forecasts Survey showed Monday.
In the quarter ended Mach 2011, the gross domestic product is expected to contract 0.1 percent. The estimated growth for the March 2011 year has been revised up to 1.1 percent from the earlier estimate of a 0.8 percent growth.
In the March 2012 year, the economy is forecast to grow 2.1 percent, up from the previously estimated 2 percent growth. Similarly, the growth outlook for the year ending March 2013 was revised up to 4 percent from 3.9 percent.
Residential investment is also forecast to pick up pace with the ongoing rebuilding activity in Canterbury gaining momentum. The Canterbury rebuild continues to be a central pillar of strong economic growth, particularly for construction, the think tank said.
Continued aftershocks complicate the outlook with economists' views diverging on the scale and timing of reconstruction in the region, NZIER added.
The rate of growth in residential investment in the March 2011 year is expected at 1.8 percent, less than the 2.3 percent estimated earlier. This is seen increasing to 2 percent in the year ending March 2012.
The growth rate is estimated to increase substantially and reach 37.9 percent in the March 2013 year, up from previously expected 26.9 percent rise, then reflecting the full effect of the Canterbury reconstruction.
Meanwhile, the consensus outlook indicates that New Zealand's current account balance will record a $1.1 billion surplus in the March 2011 year. Thereafter, it is seen turning to a deficit of $11.5 billion by the March 2013 year.
At the same time, the outlook for export growth for the March 2011 year was revised down to 1.8 percent from 2.1 percent, and that for the March 2012 year to 4 percent from 4.2 percent. In 2013, exports are expected to grow 3.4 percent, down from 3.6 percent initially thought.
The forecast for import growth was raised to 10.2 percent from 6.9 percent for 2011 and to 7.5 percent from 6.4 percent for 2012. In the March 2013 year, the import growth is seen at 4.9 percent, down from the earlier estimate for a 5.4 percent increase.
An elevated exchange rate will reduce export competitiveness and stoke import demand, NZIER said. The NZ dollar exchange rate is expected to stay relatively high in the coming years, according to the survey.
Economists raised their inflation forecasts, adding to the concern of the central bank. The average inflation rate for the March 2012 year is currently expected to be 2.8 percent, revised up from 2.6 percent, while in 2013 inflation is forecast to be 2.7 percent.
The New Zealand central bank targets inflation between 1 percent and 3 percent. Further, wages are forecast to stage a strong rebound, while some expect a grinding recovery.
Unemployment is seen falling to 5.3 percent by 2013 from 6.6 percent in 2011. Employment growth is expected to be modest at 1.3 percent in 2012 and accelerate to 2.5 percent in 2013.