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Source: ONE News -
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New Zealand's recovery from the global economic crisis could be slowed by high private sector debt and the rising kiwi dollar, among other factors, the OECD says.
The Paris-based Organisation for Economic Co-operation and Development has just released it Economic Outlook for its 30 member countries.
In the twice-yearly report, it lowered its estimates of the scale of this year's recession and substantially raised most of its forecasts for growth in 2010.
It forecasts global growth next year to be 3.4%, an increase from the 2.3% it was predicting as recently as June, after an estimated contraction of 1.7% in 2009.
But it says the world economy would remain dependent on government life-support in 2010.
Asia, it says, is leading the global economy out of the downturn.
"The upturn in the major non-OECD economies, especially in Asia and particularly China, is now a well-established source of strength for the more feeble OECD recovery," it says.
The OECD's only two Asian members are Japan and South Korea.
Compared with a GDP forecast of 1.9% next year for the mostly industrialised countries of its own membership, the OECD forecast growth of more than 10% in China this year. This is due in large part to massive stimulus that it believes maintained GDP growth at more than 8% in 2009, when output was shrinking across the West.
Of New Zealand it says: "the recovery could be hampered by the overhang of high private sector indebtedness, ongoing credit contraction, the currency's recent strength and rising unemployment".
It suggests the New Zealand government keep in place its expansionary monetary and fiscal policies "for the time being".
"However, if the recovery takes hold as projected, stimulus should start to be withdrawn by mid-2010 in order to reinforce balance-sheet restructuring and, in conjunction with structural reforms, to steer activity toward tradeables production rather than housing investment as the main generator of income and wealth," the OECD says.
Reserve Bank governor Alan Bollard has also warned of the risks of another investment housing boom, saying it comes with strong demand for mortgages, strong demand for external funding, pressure on the exchange rate, and pressure on the traded sector.
The OECD expects world trade to grow 6% in 2010 and 7.7% in 2011 after a plunge of 12.5% this year.
OECD economist Elmeskov said the OECD might even be underestimating the demand from fast growers such as China.
On the jobs front, the OECD forecast further increases in the OECD-wide unemployment rate, to 9.0% in 2010 and 8.8% in 2011 from 8.2% in 2009.
November is Spotlight on the Economy month for TVNZ7
Watch the Beyond The Recession Summit where Corin Dann will explore what we need to do to ensure a prosperous New Zealand exits from the current recession.
A dozen business leaders, analysts and commentators will share their views in the summit - the repercussions of this challenging economic period, and the impact it will have on society both economically and culturally.
Catch the summit on TVNZ 7 Monday November 23 at 9.10pm
