New Zealand Country Risk Report

Providing comprehensive data and in-depth analysis of political, financial and economic risk.

Report includes: BMI's Core Views, 10-year Forecasts, BMI's Economic Risk Index, Political Stability and Risk Index, Long-term Political Outlook, Operational Risk Index, SWOT Analysis and Structural Economic Sections

Why you should buy this report

  • Understand and measure the political, business environment and operational risks to your company
  • Gain insight on emerging trends that could support, strengthen or disrupt your activities in the market
  • Benefit from 10-year macroeconomic forecasts and insight into the structural characteristics of the economy
  • Get the long-term political outlook and explore possible scenarios for change
×

Sign up to download the New Zealand Country Risk Report

By submitting this form you are acknowledging that you have read and understood our Privacy Policy.

Thank you for your interest

You will shortly receive your free executive summary by email.

New Zealand Country Risk Report
Product Price
$1,195.00

Core Views

  • The New Zealand economy is experiencing a gradual deleveraging cycle, which will weigh on real GDP growth over the coming years. While declining oil prices will provide some support to corporate profit margins and economic activity, these positives will likely be offset by the joint deterioration in the dairy and construction sectors, which remain the two key pillars of the economy.

  • New Zealand's fiscal accounts remain in better health compared with most developed market economies. The government posted a budget surplus equivalent to 0.3% of GDP for FY2014/15 (July-June), fulfilling its promise made in 2011 to return the government's accounts to positive territory by FY2014/15. We expect the country's fiscal surplus to continue growing over the coming years, and this will be supported by continued spending restraint, which should keep government spending relative to GDP stable even as the welfare burden grows.

  • Following cuts totalling 100 basis points (bps) since its June 2015 monetary policy meeting, we are forecasting the Reserve Bank of New Zealand (RBNZ) to cut its official cash rate (OCR) by another 50bps to 2.00% in 2016 as a result of a weak economy. With inflation remaining well below its medium-term target of 2.0%, the central bank will also be pressured to ease interest rates in an attempt to spur inflation.

  • Despite the gradual improvement since 2008, New Zealand's external accounts remain the economy's weak link and a persistent current account deficit poses risks of large-scale capital outflow. In order to correct these imbalances, we will need to see domestic savings rise sharply, while investment growth cools, which will undermine economic growth to some extent.

  • While the New Zealand dollar is likely to range trade against the US dollar in the short-term, we maintain that further kiwi weakness is likely over the medium term as the country's high elevated level of external indebtedness leaves the currency exposed to capital outflows amid weak dairy prices and a precarious property market.

Major Forecast Changes

  • We have revised lower our 2016 real GDP growth forecast to 2.3% (from 2.5% previously) given the significant downside risks to economic activity in the agriculture and construction sectors.

  • We now expect the RBNZ to cut its benchmark policy rate by 50bps to a new historical low of 2.00% (versus 2.25% previously) given the central bank's dovish rhetoric, continued downside risks to economic activity, and below target inflation.

  • We have revised stronger our 2016 average forecast for the New Zealand to USD0.6500/NZD (from USD0.5800/NZD previously), and this is further elaborate in the currency forecast section. Despite our upgrade, we remain bearish the NZD against the USD as its high level of external indebtedness continues to leave the currency exposed to capital outflows as the economy remains subdued amid a weak agricultural sector and a precarious real estate market.

Key Risks

We believe there are two main risks facing the New Zealand economy:

  • Domestically, a continued surge in property prices could sow the seeds for an eventual sharp decline and associated financial instability owing to the large levels of household debt in the economy and the banking sector's exposure to the mortgage market. The property market is overvalued from a nationwide perspective, but key cities such as Auckland are experiencing what appear to be bubble-like price advances, which left unchecked could create financial instability.

  • Externally, a sharper than expected decline in Chinese import demand could lead to further declines in dairy prices and export volumes, reversing the enormously beneficial upturn seen in New Zealand's terms of trade over recent years. So far, New Zealand's terms of trade have only deteriorated slightly, but a collapse in Chinese demand could weigh further on New Zealand's dairy export prices.

Macroeconomic Forecasts (New Zealand 2014-2017)
Indicator 2014 2015e 2016f 2017f
e/f=BMI estimate/ forecast. Source: National Sources, BMI
Real GDP growth, % y-o-y 3.3 2.4 2.3 2.5
Nominal GDP, USDbn 197.3 170.4 154.3 148.1
Consumer price inflation, % y-o-y, eop 0.8 0.1 0.0 1.0
Exchange rate NZD/USD, eop 1.28 1.46 1.82 1.67
Budget balance, % of GDP -1.1 0.3 0.6 1.2
Current account balance, % of GDP -3.3 -3.0 -2.7 -2.4
Executive Summary
5
Core Views
5
Major Forecast Changes
5
Key Risks
5
Chapter 1: Economic Outlook
7
SWOT Analysis
7
BMI Economic Risk Index
7
Economic Growth Outlook
8
Growth Downgrade As Agriculture And Construction Weaken
8
GDP By Expenditure Outlook
9
TABLE: GDP GROWTH FORECASTS
10
TABLE: PRIVATE CONSUMPTION FORECASTS
10
TABLE: GOVERNMENT CONSUMPTION FORECASTS
10
TABLE: FIXED INVESTMENT FORECASTS
10
TABLE: NET EXPORTS FORECASTS
10
Fiscal Policy And Public Debt Outlook
11
Risks That Could Undermine Optimistic Fiscal Outlook
11
Structural Fiscal Position
12
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES
12
Currency Forecast
13
NZD: Bearish Case Still Intact Amid Poor Fundamentals
13
TABLE: BMI CURRENCY FORECAST
13
Outlook On External Position
14
TABLE: MAIN EXPORT AND IMPORT PARTNERS
15
TABLE: MAIN EXPORTS AND IMPORTS
15
TABLE: CAPITAL & FINANCIAL ACCOUNT BALANCE
15
Monetary Policy
16
NZD To Falter Amid Deepening Easing Cycle
16
Monetary Policy Framework
17
Chapter 2: 10-Year Forecast
19
The New Zealand Economy To 2025
19
Deleveraging Will Weigh On Growth
19
TABLE: LONG-TERM MACROECONOMIC FORECASTS
19
Chapter 3: Political Outlook
21
SWOT Analysis
21
BMI Political Risk Index
21
Domestic Politics
22
Warm Bilateral Ties To Aid Investment In Iran
22
TABLE: POLITICAL OVERVIEW
22
Long-Term Political Outlook
23
Stability To Prevail, But Not Without Challenges
23
Chapter 4: Operational Risk
27
SWOT Analysis
27
Operational Risk Index
27
Operational Risk
28
TABLE: DEVELOPED STATES - LABOUR MARKET RISK
28
TABLE: DEVELOPED STATES - LOGISTICS RISK
32
TABLE: DEVELOPED STATES - CRIME AND SECURITY RISK
34
TABLE: DEVELOPED STATES - TRADE AND INVESTMENT RISK
37
Chapter 5: BMI Global Macro Outlook
39
Global Macro Outlook
39
Tail Risks Mounting Amid Sub-Par Growth
39
TABLE: GLOBAL ASSUMPTIONS
39
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
40
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, 2015 AND 2016 (%)
40
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %
41
TABLE: MACROECONOMIC DATA & FORECASTS
43

Assess your risk exposure in New Zealand with our 100% independent forecasts assessing the pace and stability of this key market. Backed by trusted data from BMI Research's 52 million data point economic forecast model, this report will allow you to measure political, economic, business environment and operational risks in New Zealand with confidence.

Your subscription service includes:

  • Delivery of the report in print and PDF
  • Online access for 12 months
  • The functionality to translate your online report into your choice of 10 languages - Arabic, Chinese, French, German, Italian, Japanese, Korean, Portuguese, Russian and Spanish
  • The ability to export data and graphs from the online report directly into your workflow
  • The support of a dedicated Account Manager to answer any questions you might have about your subscription
  • Access to our team of leading analysts who will be happy to answer any questions you might have about the data and forecasts included in this report