New Zealand: GDP surprised to the downside in Q4 2022 – UOB

Lee Sue Ann, Economist at UOB Group, assesses the latest GDP figures in New Zealand.

Key Takeaways

“GDP came in much weaker than expected, contracting by 0.6% q/q in 4Q22, in contrast to the revised 1.7% q/q gain in 3Q22, and lower than expectations for a print of -0.2% q/q. The latest GDP outcome was also sharply weaker than the Reserve Bank of New Zealand (RBNZ)’s Feb MPC projection of +0.7% q/q.”

“The impacts of severe weather and flooding earlier this year will cloud the economic outlook. Our view is that the economy is likely to experience further weakness ahead. We have lowered our GDP growth forecast for 2023 to 1.3%, from 1.5% previously.”

“We now think the RBNZ will have to dial back on further rate hikes, especially in light of the looming policy-induced recession and surging migration domestically, as well as on the back of current global financial stability concerns. The next RBNZ meeting is on 5 Apr, where we are penciling in a 25bps hike in the OCR to 5.00%, after which we expect a pause in the current tightening cycle.”