Moody’s sees ‘anaemic’ NZ growth after Christchurch quake

Article – BusinessDesk

Moody’s sees ‘anaemic’ NZ growth after Christchurch quake; kiwi sinks to 2-month low

Moody’s sees ‘anaemic’ NZ growth after Christchurch quake; kiwi sinks to 2-month low

Feb. 22 (BusinessDesk) – New Zealand may face another year of anaemic economic growth after Christchurch was hit by a second major earthquake, says Moody’s Analytics, a unit of the global credit rating company.

The nation has been the ‘unlucky country’ over the past three years, unlike neighbouring Australia. Drought helped push New Zealand into recession in 2008 just as the global financial crisis was kicking off, Moody’s says.

Last September’s 7.1 magnitude quake then undermined any economic recovery and the latest, more-damaging 6.3 magnitude quake “will be another devastating blow to an economy struggling to gather steam,” said Katrina Ell, associate economist at Moody’s Analytics. The New Zealand economy may now face “another year of anaemic growth due to forces beyond its control.”

The New Zealand dollar tumbled against the greenback following Tuesday’s quake, sinking to 74.86 U.S. cents from 76.32 cents immediately before. It fell to 74.74 Australian cents from 75.69 cents.

Economists had been winding back the timing of any interest rate increases by the Reserve Bank before today and the devastating temblor may have pushed back the timing further.

The quake may shave as much as 0.2% off economic growth, the same as the September earthquake is estimated to have done, according to ASB economist Nick Tuffley.

Moody’s said the boost to economic growth following September’s earthquake was “underwhelming.”

“In the wake of the initial disruption to production, business and consumer confidence plummeted and has yet to recover,” Ell said. “The construction sector continues to struggle and employment growth decreased in the fourth quarter despite a reduction in the participation rate, prompting the central bank to shelve ambitions to withdraw monetary stimulus from the economy.”

Households have been focused on deleveraging – saving and paying down debt rather than spending, which may restrain the fillip that might be expected from consumers replacing damaged possessions,” Ell said.

(BusinessDesk)

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