IMF's forecast for NZ 'very optimistic' - economist

Shamubeel Eaqub, principal economist for NZIER. Photo / Marty Melville

A leading New Zealand economist says he lacks faith in the International Monetary Fund's forecast that the local economy will grow by more than 3 per cent next year.

The IMF yesterday released its World Economic Outlook, in which it predicted the New Zealand economy would grow by 2.2 per cent this year and 3.1 per cent in 2013.

Growth in some countries, including New Zealand and Australia, was being boosted by "recovery from natural disasters", the report said.

The IMF's forecast of 3.1 per cent growth was questioned today by New Zealand Institute of Economic Research principal economist Shamubeel Eaqub.

"It's very optimistic and is pretty much based on the Christchurch rebuild."

Eaqub said there was no real evidence to show that rebuild activity after natural disasters gave a significant boost to local economies. Although, the Canterbury rebuild would be "much bigger than usual", he said.

"Forecasts will depend very much on your assumptions for the Christchurch rebuild - how quickly it will happen and how big it will be.

"I don't have a lot of faith that they (the IMF) know what's going on here. They're much better on global stuff."

Westpac Bank senior economist Michael Gordon said he thought the IMF's forecast for New Zealand was, if anything, a little conservative.

"I would say it's on the low side for both years, but to be fair, we tend to be at the upper end.

"We tend to find that the regions they're picking growth to be faster in are where there's leeway for spending, in our case, the stimulus from the rebuilding in Christchurch."

Gordon said the rebuild would likely generate at least $20 billion towards the economy, or 10 per cent of annual GDP.

"No other developed country has faced anything like this for a long, long time," he said.

The IMF listed New Zealand among the 'Advanced Economies', alongside countries like the United States, United Kingdom, Australia and Germany.

It is forecasting the global economy to expand at 3.3 per cent this year and 3.6 per cent in 2013.

That was a revision of its July forecasts of 3.5 per cent in 2012 and 3.9 per cent in 2013.

The downside for New Zealand in having stronger growth than other advanced economies was that our dollar would remain high, putting pressure on exporters, Gordon said.

"By and large we're expecting it to stay fairly close to where it is, at 80 US cents plus.

"Longer term, the hopes of getting the US dollar up and the New Zealand dollar down rests on US growth starting to be a bit more impressive than it's been for the past few years."

The New Zealand Institute of Economic Research yesterday predicted economic growth to slow to 1.5 per cent in the second half of the year from a pace of 2.6 per cent at the end of June.

That came after a more pessimistic outlook in the September quarterly survey of business opinion.

A net 5 per cent of firms were pessimistic about the general business situation, worse than a net 1 per cent in the June quarter, and a net 7 per cent experienced slower trading activity in the period, compared to a flat rate in the prior period.