Boston, MA -- (SBWIRE) -- 06/27/2013 -- Core Views

As households continue to deleverage and with the government likely to intervene to restrain optimism around New Zealand's housing market, we expect private consumption growth to be relatively benign in 2013. We forecast New Zealand's overall real GDP growth to come in at 2.2% in 2013. Risks remain firmly weighted to the downside as uncertainties surrounding other economies persist.

We believe that the Reserve Bank of New Zealand (RBNZ) will keep interest rates on hold at 2.50% until 2014, as the economy adjusts to a slower rate of credit growth. We project consumer price inflation to remain below the central bank's 2.0% target given our expectations for a slow recovery in the job market due to mismatches between skills and job vacancies.

New Zealand will see its trade balance return to positive territory in 2013, as import growth is likely to slow as households save more. A growing trade surplus, assisted by a weakening currency and falling income outflows, will mean the country's current account will very likely return to surplus in 2015. This will allow the country to gradually pay back its huge external liabilities and reduce its vulnerability to external shocks. However, unpredictable dry weather could affect agricultural exports and therefore poses a downside risk to our projections.

View Full Report Details and Table of Contents

The National Party remains determined to achieve its goal of returning the budget to surplus in fiscal year 2014/15. While the issues of housing affordability, drought assistance for farmers, and controversial decisions on the country's pull-out from the second commitment period of the Kyoto Protocol remain contentious topics that could affect the ruling party's popularity in the months ahead, we do not see any immediate threat to its ability to formulate policy. We maintain our short-term political risk rating at 84.0 and expect the economy's performance to remain the main focus in the 2014 elections. In this respect, the stubbornly high unemployment rate could prove to be a problem for the National Party.

Major Forecast Changes

Given the persistent rise in house values, we highlight that there is an increasing possibility that the RBNZ will hike rates to dampen housing credit growth. However, we expect the central bank to enlist other tools - such as higher loan requirements and cash outlays - before considering a rate hike.

We have upgraded our expectations for 2013 gross fixed capital formation growth to 2.8%, from a previous 2.5%, as the outlook for businesses gradually improved over Q113. The acceleration of rebuilding activity in Canterbury following the recent earthquakes and greater fiscal flexibility from the probable divestment of Mighty River Power suggest that there could be upside risks to our 2013 forecasts for investment growth.

About Fast Market Research
Fast Market Research is an online aggregator and distributor of market research and business information. Representing the world's top research publishers and analysts, we provide quick and easy access to the best competitive intelligence available. Our unbiased, expert staff will help you find the right research to fit your requirements and your budget. For more information about these or related research reports, please visit our website at http://www.fastmr.com or call us at 1.800.844.8156.

Browse all Country Reports research reports at Fast Market Research

You may also be interested in these related reports:

- Zimbabwe Business Forecast Report Q3 2013
- Kuwait Business Forecast Report Q3 2013
- China Business Forecast Report Q3 2013
- Lithuania Business Forecast Report Q3 2013
- Venezuela Business Forecast Report Q3 2013
- Nigeria Business Forecast Report Q3 2013
- Cote d'Ivoire Business Forecast Report Q3 2013
- Japan Business Forecast Report Q3 2013
- New Zealand Business Forecast Report Q2 2013
- Australia Business Forecast Report Q3 2013