Economists expect to see the economy turning around from mid-2019
Westpac economists have said that New Zealand’s economy has slowed – and they expect it to get worse before it gets better.
According to NZ Herald, Westpac economists have slashed their 2020 annual GDP forecast from 3.1% to only 2.3%, adding that they expect a rise in unemployment over the coming months.
Meanwhile, annual per capita GDP growth is now only 1.1% as it adjusted for population changes – the slowest pace in eight years.
“We expect the situation to get worse before it gets better, as the escalating US-China trade war makes its mark on global economic growth,” Dominick Stephens, chief economist at Westpac, told NZ Herald.
Read more: Global recession threatens New Zealand mortgage rates
Stephens said that while the labour market had been resilient as unemployment fell to 3.9% in June, hiring intentions were faltering – making him confident it will rise to 4.2% by the end of the year as the annual GDP drops to 2.1% for 2019.
However, the economists expected to see the economy turning around from mid-2019 due to increases in government spending and low interest rates, which would then “spur asset prices, including acceleration in house price inflation from around 1 per cent now to 7 per cent next year.”
"The Reserve Bank is riding to the rescue, and we argue that it will be effective. Mortgage rates have tumbled, and if further stimulus is required the Reserve Bank has options such as quantitative easing," Stephens concluded.
