The economic landscape of New Zealand seems to be not so hopeful with the chances for a hard landing appearing as business confidence takes an important hit in the first quarter.
As per the NZ Institute of Economic Research (NZIER), a net 25 % of firms are negative about the economic outlook for the next six months, a sharp rise from 2 % in the previous quarter.
In the first quarter, a net 23 % reported a deterioration in their trading conditions, marking the weakest reading since mid-2020 during the Covid-19 pandemic.
Christina Leung, Bloomberg cited NZIER’s Principal Economist said, ‘The key question is whether we are headed for a soft or a hard landing. Previously our forecast was a soft landing for the New Zealand economy. With this release, it suggests an increased risk of a hard landing’.
The Reserve Bank of New Zealand is expected to maintain the Official Cash Rate at 5.5 % in its upcoming decision, with most economists anticipating monetary easing to start in late 2024.
However, NZIER projects that policymakers will hold rates steady until May next year.
The central bank’s high-interest-rate policy aimed at keeping back inflation is beginning to manifest in the form of company profits and job cuts, worsening the economic slowdown.
New Zealand’s economy has contracted in four out of the past five quarters, raising concerns about further deceleration in 2024.
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