NZIER downgrades New Zealand’s growth forecast

Growth forecast to flat in 2025, recovery delayed

Sluggish productivity, low migration weigh on economy

The New Zealand Institute of Economic Research (NZIER) has downgraded its growth forecast for the country, predicting flat growth in 2025 as the economic recovery from the COVID-19 pandemic is delayed.

In its latest Quarterly Predictions, NZIER lowered its GDP growth forecast for 2023 to 1.8%, down from the 2.2% it predicted in May. The institute also downgraded its growth forecast for 2024 to 2.3%, down from 2.7%.

The downgrade comes as the New Zealand economy faces a number of challenges, including sluggish productivity, low migration, and rising costs.

Sluggish productivity

NZIER’s latest Quarterly Predictions highlights that New Zealand’s productivity growth has been sluggish in recent years, averaging just 0.5% per year over the past decade.

This compares unfavorably to Australia, which has averaged productivity growth of 1.0% per year over the same period.

The lack of productivity growth is a drag on the New Zealand economy, as it means that businesses are unable to produce more goods and services with the same amount of inputs.

Low migration

Another factor weighing on the New Zealand economy is low migration.

Net migration to New Zealand has fallen sharply since the COVID-19 pandemic, and is now at its lowest level since the 1980s.

This has led to a shortage of skilled workers in some sectors, which is pushing up wages and making it difficult for businesses to grow.

Rising costs

The New Zealand economy is also facing rising costs, including higher fuel prices, food prices, and interest rates.

These rising costs are putting pressure on businesses and households, and are likely to dampen economic growth in the coming years.

Conclusion

The NZIER’s latest Quarterly Predictions paint a challenging picture for the New Zealand economy.

The institute’s downgrade of its growth forecast to flat in 2025 reflects the challenges that the economy faces, including sluggish productivity, low migration, and rising costs.

The government will need to address these challenges if it wants to get the economy back on track to strong and sustainable growth.