All hope is not lost concerning New Zealand's economy as it is doing better than expected, according to ASB economists.
ASB's latest Quarterly Economic Forecast predicts that the country's economy will shrink 5% year-on-year by the end of 2020, which is an improvement compared to the previously predicted 6% decline in its May report.
ASB economists also expect the unemployment rate to drop by 7.5% rather than the 9% predicted in May and anticipate house price falls to be limited to around 3%.
Nick Tuffley, the chief economist at ASB, said Auckland's rapid move from the strict lockdown in March to alert level 1 “limited the extent of near-term economic carnage.”
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However, ASB economists warned that challenges remain as the COVID-19 pandemic continues to impact key markets in the country, with the August lockdown estimated to have shaved 8% off New Zealand's weekly GDP and cost over $1 billion in lost economic activity.
“Until COVID-19 is brought under control, economic activity will face periods of disruption. An effective vaccine to combat the outbreak could still be years away, and until then, containment looks to be the best solution. The art will be refining and adapting restrictions and business operations to minimise disruptions,” Tuffley said.
“While the local economy has proven to be more resilient than expected over 2020, we remain relatively cautious about the pace of growth over 2021 and 2022. In our view, it will be 2023 before the New Zealand and global economies properly enter ‘recovery mode’ and allow for above-average rates of GDP growth.”