New Zealand: Macroeconomic Country Outlook
- GlobalData forecasts New Zealand’s real GDP to grow by 3.1% in 2022
- New Zealand ranked fifth out of 152 nations in the GlobalData Country Risk Index (GCRI) Q2 2022
- According to GlobalData, the services sector of New Zealand contributed 77.8% to the overall GVA in 2021
The country was ranked first in terms of ease of starting a business, according to the World Bank, Doing Business Report (2020). To start a business in New Zealand, it takes only one procedure as compared to the OECD average of 4.9 procedures, and requires only half a day, well below the OECD average of 9.2 days. Moreover, 0% paid-in minimum capital (percentage of income per capita) is required to start a business, which is outstanding when compared to the OECD average of 7.6%. New Zealand also fared better than the OECD average on other indicators, such as dealing with construction permits, registering property, getting credit, protecting minority investors, paying taxes, enforcing contracts, and resolving insolvency. These indicators speak favorably about the business-friendly environment in New Zealand.
Key findings
- New Zealand is the least corrupt nation in the world, as it enhances international collaboration to reduce corruption: According to Transparency International, Corruption Perception Index (2021), New Zealand ranked first out of 180 countries in 2021, with a high score of 88 out of 100. The country’s top ranking is due to strong law enforcement, public participation in fighting corruption, and transparency mechanisms, such as the disclosure of information. The country’s political leadership has also shown a strong anti-corruption stance, which is expected to keep the country corruption-free despite the changes in government. The country’s press also enjoys a high degree of freedom, which allows it to expose corruption.
- 5G network rollout: 5G network rollout in New Zealand has been announced by 2degrees in February 2022. Customers can use the 5G network in certain areas in Christchurch and central parts of Auckland and Wellington. More suburbs in these three cities will have sites coming online week by week as 2022 proceeds. 2degrees has invested more than $1 billion in its network, including a long-term plan to replace every site in Auckland, Wellington, and Christchurch with brand-new, cutting-edge equipment from Ericsson. In addition to developing a world-class 5G network for the future, they are also improving current 4G network.
- New Zealand has a strong political system: New Zealand’s governance indicators are good, with a 99.0 percentile in 2020 on the voice and accountability parameter of the World Bank’s Worldwide Governance Indicators (2021). This parameter measures the extent to which citizens of a particular country are able to participate in selecting their government, along with the freedom of expression, freedom of association, and availability of free media. The country ranks highly due to its openness and liberal attitude toward the press. The country’s percentile ranking for political stability and absence of violence was 97.6 the same year.
- New Zealand has strong environment policies and lower levels of pollution compared to other nations: New Zealand has low levels of pollution compared to its peers. According to Yale University, Environmental Performance Index (2022), New Zealand ranked 26th out of 180 countries, highlighting its good performance in terms of environmental protection. The government is undertaking various initiatives to tackle air pollution and reduce emissions, such as toughening vehicle emission standards and fuel standards to reduce vehicular air pollution. In October 2016, New Zealand ratified the Paris Agreement and submitted it to the UNFCCC. The country aims to oversee a 30% reduction (below 2005 levels) by 2030. To conserve biodiversity, projects such as Predator Free 2050 have been introduced to remove predators that damage the country’s biodiversity.
- 2022 Budget focuses on economic recovery, strengthen healthcare and environment: The government acted swiftly in March 2022 to reduce fuel excise levies and decrease public transportation cost, considering the high inflation rate globally and the COVID-19 supply chain pressures that are being worsened by rising oil prices as a result of invasion of Ukraine. The annual budget for 2022 attempts to support households with low and middle incomes through cost-of-living payment, extension of fuel duty reduction through a $1 billion of targeted help. To transform health system and deliver better services to the nation, the country has allocated $11.1 billion. To combat climate change and build a more secure economy by putting a priority on immediate decarbonization and energy security, $2.9 billion is invested from the Climate Emergency Response Fund.
- Economic growth to slow down in 2022: The government has been able to control the spread of COVID-19 since June 2020, leading to a better fiscal position than many other countries. An effective vaccination program and prudent government spending led to a quick rebound in economic activity. According to GlobalData, the economy grew by 4.9% in 2021. According to Stats NZ, the real GDP grew by 5.1% on an annual basis in Q1 2022 following a 5.6% growth in the previous quarter. GlobalData forecasts the real GDP to grow by 3.1% in 2022, a slowdown from last year as the economy is facing multiple challenges of high price level, interest rate rise, and slowdown in economies of trading partners.
Key fundamentals
Sectoral outlook
- Tourism industry to revive in 2022: As New Zealand reopened its border for tourism from August 1, 2022, the revenue from tourists is expected to increase in 2022. According to the Ministry of Business, Innovation and Employment, the number of tourists to New Zealand is forecast to increase by 5.4% annually, from 3.1 million in 2015 to 4.5 million in 2022. In 2022, the total amount spent abroad is anticipated to exceed $16 billion, an increase of 65.5% from 2015. According to projections of the Ministry of Business, Innovation and Employment, this market will remain strong and is expected to expand by 25% by 2022.
- Aviation sector to revive in 2022: The transport ministry stated that it has extended crucial support to the aviation industry’s Maintaining International Air Connectivity (MIAC). scheme until March 2023 in order to aid in restoration of international links and boost New Zealand's economic recovery. As travel demand returns, state carrier Air New Zealand Ltd. anticipates reaching 75% of its pre-Covid-19 international capacity and more than 100% of its pre-pandemic domestic levels by the end of 2022, and is conscious of the unstable macroeconomic situation, which is exacerbated by interruptions brought in by Covid-19 variations, continuous travel ban in some countries, and the ongoing crisis in Ukraine, which is driving up the cost of jet fuel. As a result of ongoing labor continuing shortages at airports, Air New Zealand has resorted to giving monetary incentives of up to $1400 to recruit new employees.
- Exports of meat and seafood highly affected due to outbreak of COVID-19 but forecast to recover in 2022: The Ministry of Primary Industries of New Zealand predicts that earnings from meat and wool exports would climb significantly to $12.2 billion in 2022, up 18% from 2021. The Ministry of Oceans and Fisheries reports that this forecast should give the seafood industry cause for optimism as it continues to provide high-quality products into international markets where there is a shortage and is anticipating export revenue from seafood to be close to the pre-COVID-19 level. Seafood exports are anticipated to reach $1.9 billion in 2022, an increase of 9% over the previous year. China continues to be the largest destination for New Zealand's meat exports, taking up about 40% of the total.
GlobalData Country Risk Index (GCRI) – Q2 2022
New Zealand ranked fifth out of 152 nations in the GCRI Q2 2022. The country’s score is in the very low-risk nations band (below 30). New Zealand‘s overall risk score is lower than the Asia-Pacific and the world average in GCRI Q2 2022 on all parameters, including macroeconomic risks, political environment, legal environment, and technology and infrastructure. New Zealand’s overall score has decreased from 21.5 in Q1 2021 to 21.1 in the Q2 2022 GCRI update.
GCRI Methodology
GlobalData’s unique Country Risk Model determines the existing and future level of country risk by assessing various qualitative and quantitative factors. The index is designed to help firms formulate their global business strategies based on historical developments in an economy.
The Country Risk Index incorporates the latest available macroeconomics, political, social, technological, environmental, and legal data from a range of recognized national and international statistical sources and incorporates proprietary data from GlobalData. Asia-Pacific nations in this publication include China, Hong Kong, India, Indonesia, Australia, New Zealand, Japan, Malaysia, Thailand, South Korea, Singapore, the Philippines, Taiwan, and Vietnam.
About the report
GlobalData Macroeconomic Outlook report is designed to provide detailed macro-economic analysis which will help clients in their business planning, investment and strategic decisions, and analysis. It also provides a quick view of the current situation and the risk score of the country in comparison to region and world based on the proprietary risk framework. The report also highlights key strengths, weaknesses, opportunities, and threats in each of the pillars of PESTLE, economic growth prospects, and key events which can impact the country’s future outlook.
More details: Macroeconomic Outlook Report: New Zealand
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