NZ in a position to withstand global economic downturn, says Grant Robertson

Highlights

• The finance minister of New Zealand says NZ is in a good position to face the global downturn
• The IMF has downgraded its growth forecast for the global economy
• It says, global growth to slow down further and inflation to peak at 9% this year

New Zealand’s finance minister Grant Robertson said on Wednesday that NZ was well-postioned to face the global downturn.  

The IMF Tuesday revised its growth forecast for the global economy downwards to 2.7% in 2023. It was 3.6% this year and 6% last year. This, according to the IMF, would be the weakest growth since 2001.

IMF forecast

IMF economist Pierre-Olivier Gourinchas downgraded global growth forecasts at a meeting in Washington, DC, Tuesday. He said that while global growth will slowdown further, inflation is likley to peak at 9% this year. This would stall growth in major economies like the US, Europe, and China. He said that more than one-thirds of the world economy is expected to slowdown this year or next.

The IMF economist said that the worst was yet to come, and for many people, 2023 would feel like a recession.

New Zealand economy

However, according to the NZ finance minister, New Zealand is likely to emerge from the pandemic stronger with “debt under control” and targeted investments into key public services such as health, education and housing.

Furthermore, the reconnection strategy of New Zealand was bringing in tourists and new opportunities for exporters, he said.

Grant Robertson added that these strengths meant that NZ could withstand the global downturn. He said while Kiwis needed to be optimistic about their position and opportunities for the economy, there was a need for a cautious approach to secure the economy against the global turmoil.

Taking more debt to fund tax cuts for the wealthiest New Zealanders would undermine this position, as seen in the UK, said the finance minister.

The IMF has recommended that for countries where the pandemic was going, it was time to rebuild fiscal buffers. Also, the global body said that the fiscal policy of a country should support people as the cost of living was rising and target the most vulnerable sections.

Further, Robertson pointed out that New Zealand’s shift to “energy independence” was very important as the IMF in its October outlook warned that the crisis in Europe was not going to be a “transitory one”.

The finance minister will be attending the IMF’s annual meeting this week and will meet with the US Federal Reserve chairman Jerome Powell to discuss the global economic situation.