New Zealand’s economic picture isn’t helping the dampening outlook for its currency. Economists at Westpac forecast a 1.5-percent gross domestic product (GDP) reading for 2006 vs. 2.3 percent in 2005. Westpac expects growth to remain weak, with 2007 figures to come in at 1.2 percent. Economy.com’s Levine also projects weak (1.4 percent) growth for 2006.
“The economy is headed for a hard landing this year,” he says. “The domestic economy is in real trouble, weighted down by elevated interest rates, record levels of household debt, a stagnant housing market and plummeting business and consumer confidence.”
Levine doesn’t think relative global economic strength will be enough to keep the New Zealand economy afloat. “With the currency weakening and the global economy still in pretty good shape, exports should start to pick up in the second half of the year, but this won’t be enough to prevent a sharp slowing in 2006 growth,” he says.
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