New Zealand: RBNZ to stay on hold in a better 2021 – Standard Chartered

Economists at Standard Chartered have risen the 2021 and 2020 GDP growth forecasts for New Zealand to 4.9% and -2.7% from 4.2% and -4.8%, respectively as the GDP growth has already rebounded to pre-COVID levels. They also expect the RBNZ to keep policy rates on hold through 2021 given the better outlook for 2021.

See: NZD/USD to drop towards 0.7006 before resuming the uptrend – Credit Suisse

Key quotes

“We raise our 2021 and 2020 GDP growth forecasts to 4.9% and -2.7% from 4.2% and -4.8%, respectively, to account for better-than-expected growth in 2020.”

“Several factors should continue to support the growth recovery in 2021, including the global economic reopening, relatively successful containment of COVID-19 domestically, rising asset prices, expansionary fiscal policy and accommodative monetary policy.” 

“Besides the obvious risks from new waves of COVID-19 and vaccine disappointment, we see several additional headwinds to growth: unemployment may rise, the potential minimum wage hike may affect hiring decisions, and investment may remain tepid amid uncertainty; however, the latest rise in business confidence offers some optimism.” 

“We expect the Reserve Bank of New Zealand (RBNZ) to maintain its accommodative monetary policy stance, but further rate cuts are unlikely given the better-than-expected growth recovery so far and significant easing in 2020. However, should economic conditions deteriorate or deployed unconventional tools prove less effective than expected, we see a risk of the RBNZ lowering the OCR by 15bps in May.”