Gradual recovery forecast - so long as Europe avoids meltdown
New Zealand's economic prospects for the year ahead rest largely on whether the Eurozone avoids a meltdown, says ASB Bank.
New Zealand's economic prospects for the year ahead rest largely on whether the Eurozone avoids a meltdown, says ASB Bank.
The bank's economists, in a quarterly update, say New Zealand's economy should continue its gradual recovery this year but how strong this is depends on the international situation.
" Europe is likely to remain in recession for parts of 2012 and the US will have another modest year," says the bank's update.
"But New Zealand's trade fortunes are increasingly tied to Asia – a faster‐growing region that has greater potential for emergency stimulus up its sleeve than developed economies. NZ is, to date, still benefiting from resilient commodity prices, notwithstanding some deceleration in global growth."
However, the biggest risk is Europe will go into "financial meltdown" and this would hit New Zealand through trade, the exchange rate, and tourism.
"Financial market volatility will remain a risk, though would show up mainly in foreign exchange and equity markets. For exporters, including the tourism industry, Europe’s crisis and the long‐term effects on its growth potential reinforce the importance of looking to Asia for sales opportunities.
"The trade prospects in Asia were always going to provide the stronger growth prospects over the long term, but Europe’s problems and loss of purchasing power through its weaker currency are amplifying the need to shift focus.
"And, as was the case in 2008/09, alternative scenarios of how businesses could be affected if the global economy and financial system take a turn for the worse could be useful to help fine‐tune responses – just in case the Europeans do stumble."
Rob Hosking
Thu, 26 Jan 2012
Thu, 26 Jan 2012
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Gradual recovery forecast - so long as Europe avoids meltdown
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