New Zealand cuts 2019/20 GDP growth forecast, unveils capital spending boost

New Zealand cut its growth forecast for 2019/2020 and flagged a budget deficit on Wednesday, but announced a significant lift in capital spending to bolster the economy with a plan to invest more than $12 billion on infrastructure projects.

The Treasury department predicted a NZ$0.9 billion budget deficit in the current 2019/20 year in its half-year economic and fiscal update, down from the NZ$1.3 billion it had forecast in its May budget.

“A small deficit in the current year is not surprising, given the impacts global headwinds are having on confidence here,” Finance Minister Grant Robertson said.

Treasury also trimmed expected surpluses for 2021 and 2022 as economic growth slows amid heightened risks from factors such as the U.S.-China trade war and Brexit uncertainty.

The growth forecast for the current year was cut to 2.3% from the previously forecast 3.2%.

Robertson said that while the economy was expected to grow more slowly, New Zealand was still outperforming its peers. “The economy continues to grow, it continues to outpace most other economies,” he told.

Robertson also announced the government’s plan to spend NZ$12 billion on new infrastructure investment, which he said was the highest level of capital spending in more than 20 years.