Grant Robertson says NZ can withstand global downturn forecast by IMF

Wednesday, 12 October 2022

Finance Minister Grant Robertson talks about the state of the Government's books.

Finance Minister Grant Robertson says New Zealand is in a strong position to face a global downturn forecast by the International Monetary Fund overnight.

The IMF has revised down its growth forecasts for the world economy and is now only expecting global growth of 2.7% next year.

That would be down from its estimate of 3.2% economic growth this year and 6% growth last year.

The IMF said that it would also represent the weakest growth since 2001, except for during the Global Financial Crisis and the “acute phase” of the Covid pandemic.

* Government books healthier than expected as emergency economic Covid response ends

IMF economist Pierre-Olivier Gourinchas downgraded global growth forecasts at a meeting in Washington overnight.

* Moody's says 'soft landing' unlikely after official cash rate hiked to 3.5%

Previously it had been expecting global growth of 2.9% next year, although the downgraded was not unexpected.

Credit ratings agency S&P warned late last month that the performance of the global economy over the next few quarters was “increasingly a one-way bet”.

The IMF now expects GDP will only rise 1% in the United States and 0.5% in the Euro-zone next year.

IMF economist Pierre-Olivier Gourinchas said “the worst is yet to come, and for many people 2023 will feel like a recession”.

Adding to the gloom, the IMF warned in its report that “risks to the outlook remain unusually large and to the downside” with a 25% chance of annual global growth falling below 2%.

Robertson said the forecast amounted to a stalling in growth in the US, Europe and China, but New Zealand would be able to “keep debt under control” while targeting investments into key public services such as health, education and housing.

“We’ve come out of the emergency Covid response in a stronger position than after the Global Financial Crisis and our reconnection strategy is bringing in tourists and new opportunities for our exporters,” he said.

Data published by Stats NZ on Wednesday showed 129,800 visitors arrived in New Zealand in August, which was down by 4400 on July and about half the number of 251,000 visitors recorded, pre-Covid, in August 2019.

However, that monthly dip in visitor arrivals was small and the first since January.

Robertson said an IMF warning that the energy crisis in Europe was not going to be a transitory highlighted the importance of New Zealand shifting towards “energy independence” through investments in renewables.