Virus threatens economic revival

Economists are predicting a positive change of fortunes for regional economies, but they also fear the spread of the new coronavirus may scupper any upswing.

The latest Infometrics Quarterly Economic Monitor suggests regional economies may be about to turn a corner, with improvements in some indicators showing that renewed strength is likely in 2020. 

However, the risks associated with the COVID-19 outbreak threatens to derail any rebound, with expectations for softer export earnings in the first half of the year. 

“Over the 12 months to December 2019, a few indicators have showed renewed promise, indicating a change of fortunes and faster economic growth may be coming” says Infometrics senior economist Brad Olsen. 

“Faster growth in traffic volumes, house prices, and tourism spending all point towards a bit more heat coming into regional economies towards the end of 2019. 

“However, travel restrictions and difficulty getting New Zealand’s exports into China, as a result of the COVID-19 outbreak, look set to pull the rug out from this potential revival of economic growth.”

‘Uncertain’ times

Olsen, pictured, says tourism activity is likely to drop lower, and New Zealand’s larger trading footprint with China means our primary sector exports such as dairy, horticulture, meat and forestry are at risk. 

“Supply chain disruptions are also becoming apparent, and there is a risk that, if the outbreak persists, consumer and business confidence may take a hit as a contagion effect takes hold and reduces economic activity,” he explains. “With COVID-19 cases still rising, the end of the outbreak and the economic impact on New Zealand, remain highly uncertain, but the first half of 2020 is likely to see markedly lower economic growth.”

The east coast of the North Island and Waikato led regional economic growth over the 12 months to December 2019, although the Tasman region continued to see the fastest regional economic growth.