With New Zealand having seemingly overcome the COVID-19 health crisis, ASB has warned that the economic crisis is only just starting.
According to the latest ASB quarterly economic forecast, New Zealand’s swift response to the outbreak has placed it in a better position to return to normality sooner than other countries. However, ASB chief economist Nick Tuffley warned that this may take some time.
“Economically, we see the country as going through three stages: surviving the crisis, adapting in a period of transition, reimagining itself into the new normal,” he said.
“The crisis period is where we are now: surviving the impacts of the lockdown and reopening when ongoing restrictions, behavioural changes, and potential for spending caution mean revenue streams are highly uncertain. It has been – and will continue to be – a time of swiftly making hard decisions.”
The forecast estimated that the transition period could take 12 to 18 months, with a number of uncertainties likely to be resolved during this time. Tuffley said that persistent and permanent shifts in behaviour will become more apparent, highlighting the importance of adaptability and flexibility.
“Finally, New Zealand will reimagine itself in what will become the ‘new’ normal. Supply chains are likely to focus more on reliability and resilience, favouring local sources more, even if at higher cost,” said Tuffley.
According to the ASB, New Zealand is on track to continue to gradually lower the Alert Level which may see economic activity recover faster than expected.
Meanwhile, NZ’s key trading partners are overall expected to fare a little better than the global average. Experts project growth among the country’s trading partners to bottom out around -2.5% for this year, before a rapid recovery to nearly 6% in 2021.
“It’s too early to judge how actual global activity is running relative to our expectations,” said Tuffley. “Among other things, we’ll be looking at China for a guide to how quickly economies can recover post-lockdown. China was obviously first to be hit by COVID-19 and looks to be coming out the other side in a stronger position than most – we expect Chinese GDP growth of 1.5% annually for 2020.”