International Economic Outlook
Global growth steady, while downside risks recede
As the global financial crisis clearly illustrated, global economic conditions are an important force impacting on the New Zealand economy. The trading partner growth outlook is similar to that underpinning forecasts in the Half Year Update. New Zealand's main trading partners, weighted by export share, are expected to grow 3.4% in the 2013 calendar year. This is slightly slower than 2012, primarily owing to slower Australian growth as mining investment moderates (Table 1.2). Trading partner growth is then expected to pick up to just below 4.0% by 2017 (Figure 1.3).
- Figure 1.3 - Top-16 trading partner growth
- Sources: IMF, Haver Analytics, the Treasury
While the central outlook for trading partner growth remains broadly unchanged from the Half Year Update, the risks to the outlook have become more balanced. Policy actions by central banks, including the willingness of the European Central Bank to purchase government bonds, additional quantitative easing in the US and additional monetary easing in Japan, have all contributed to a reduction in extreme downside risks. There are also upside risks to the outlook, some of which are associated with the impacts of increased monetary easing in Japan and the US, but also a stronger-than-expected cyclical rebound in global demand.
However, risks are still slightly skewed to the downside. The euro area remains weak, with the region's activity expected to contract again in 2013. The bailout of Cyprus in March shows policy-makers are still only “managing through” the crisis, while the underlying issues of high government debt and a lack of competitiveness in the peripheral economies remain. Other downside risks include a greater-than-expected impact on growth from the automatic government spending cuts in the US, as well as a large housing market correction in China. More detail on the risks to the global outlook can be found in the Risks and Scenarios chapter.
| 2013 weights |
2012 Actual |
2013 Forecast |
2014 Forecast |
2015 Forecast |
2016 Forecast |
2017 Forecast |
|
|---|---|---|---|---|---|---|---|
| Australia | 27% | 3.6 | 2.7 | 2.9 | 3.0 | 3.0 | 3.0 |
| China | 17% | 7.8 | 8.0 | 7.6 | 7.3 | 7.0 | 7.0 |
| United States | 11% | 2.2 | 1.7 | 2.4 | 2.5 | 2.5 | 2.5 |
| Japan | 9% | 2.0 | 1.0 | 1.4 | 1.1 | 1.0 | 1.0 |
| Euro area | 8% | -0.5 | -0.4 | 1.0 | 1.2 | 1.3 | 1.4 |
| United Kingdom | 4% | 0.3 | 0.7 | 1.4 | 1.8 | 2.0 | 2.0 |
| Canada | 2% | 1.8 | 1.6 | 2.3 | 2.4 | 2.5 | 2.5 |
| Other Asia* | 23% | 3.8 | 4.3 | 4.7 | 5.0 | 5.0 | 5.0 |
| Trading Partner Growth (TPG) | 100% | 3.5 | 3.4 | 3.8 | 3.8 | 3.8 | 3.9 |
| TPG - Consensus (April 2013) | 3.5 | 3.5 | 3.9 | 4.1 | 4.1 | 4.0 | |
| TPG - IMF WEO (April 2013) | 3.5 | 3.5 | 4.1 | 4.2 | 4.3 | 4.4 |
* South Korea, Taiwan, Hong Kong, Singapore, Malaysia, Indonesia, Thailand, Philippines, India
Sources: IMF, Haver Analytics, Consensus Economics, the Treasury
