New Zealand: GDP figures surprised to the downside in Q1 – UOB

Economist at UOB Group Lee Sue Ann reviews the latest GDP results in New Zealand.

Key Takeaways

“GDP unexpectedly contracted by 0.2% q/q in 1Q22, in contrast to the 3.0% q/q gain in 4Q21, and against expectations for a print of +0.6% q/q. The quarter was largely marked by the community spread of the Omicron COVID-19 variant, which saw low travel due to border restrictions. Compared to the same period one year ago, GDP rose by 1.2% y/y, following a 3.1% y/y print in 4Q21, and just half of expectations for a gain of 2.4% y/y.”

“We expect a stronger pickup in the subsequent two quarters (2Q22 and 3Q22) as the economy moves past the domestic COVID-19 disruptions. However, 4Q22 will likely see some loss of momentum as rising interest rates start to bite. This will set the scene for slower growth in 2023. Our GDP forecast for growth in 2022 has been lowered to 2.4% from 3.6% previously. For 2023, our forecast remains broadly unchanged at 3.0%.”

“Following the two back-to-back half-point increases in Apr and May, we expect the Reserve Bank of New Zealand (RBNZ) to tune back to the more usual pace of 25bps hikes from Jul onwards, bringing the Official Cash Rate (OCR) to 3.00% by year-end. The next RBNZ meeting is on 13 Jul.”