The World Bank expects global growth to be around 1.7%
New Zealand households have been urged to prepare a financial buffer as the world faces the threat of its third recession since 2009.
This comes as summer sales lure inflation-battered Kiwis, who appeared to have fallen into temptation, with spending in the first week of 2023 up 1.6% on last year.
People might start to heed the warning, however, after the World Bank cut its previous projection of 3% growth, due to rising interest rates, the war in Ukraine, and the COVID-19 pandemic 1News reported.
“Global growth will be around 1.7%. This is the lowest growth rate outside of global recessions since the early 1990s,” said Ayhan Kose, World Bank chief economist.
“What would be useful would be for households and businesses to have a buffer so to have that headroom to withstand any negative shocks,” economist Christina Leung said.
The world’s major economies are expecting slower growth than forecast six months ago, with the US falling from 2.4% to 0.5%, China from 5.2% to 4.3%, and the Eurozone standing still at 1.9% to 0%.
Despite a weakening of key markets for New Zealand products, exporters remain confident.
“Food and fibre exports are expected to grow over the next 12 months, the forecast is out to about $55 billion in export revenue, and that’s a record,” said Joshua Tan of Export NZ. “On the domestic front, higher interest rates will bite – when nearly half of all mortgage holders have to refix this year.”
“It’s a bit like the analogy being used of a wonky hotel shower...” Leung told 1News. “You are standing in the shower, waiting for the hot water to come through, and as you’re waiting and waiting, you’re cranking up the heat, but such that it finally does, it scalds you.”
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