New Zealand’s near-term economic outlook is less negative than estimated previously but the contraction in the June 2020 quarter will far exceed previous records, the treasury said Wednesday.
The economy will shrink 16 percent in the June quarter, which was smaller than the 23.5 percent fall estimated in May, the treasury said in its Pre-election Economic and Fiscal Update.
Further, the restriction imposed in the wake of covid-19 pandemic is expected to dampen the rebound in GDP in the September quarter of 2020, the treasury observed.
The statistical office is set to publish the June quarter GDP data on September 17.
According to treasury, the budget deficit will widen to NZ$31.7 billion in 2020/21 from around NZ$23.4 billion in the previous year. The deficit averaged NZ$16.2 billion over the last three years of the forecast.
“Global headwinds and this 1-in-100 year economic shock caused by COVID-19 will have a long-term effect on the Government’s books,” Finance Minister Grant Robertson said.
“COVID-19 is hurting economies around the world but because New Zealand went into this with low debt and a growing economy, we will come out better than other advanced countries,” Robertson said.
Unemployment is projected to rise over the coming quarters as border restrictions weigh on activity and fiscal support is eased.
The unemployment rate is expected to peak at 7.8 percent in the March 2022 quarter, down from the peak of 9.8 percent in the September 2020 quarter forecast in the Budget Update.
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