Growth forecast up again

By Brian Fallow

WELLINGTON - Economic growth forecasts for our 14 largest trading partners have been revised up again.

The consensus among their economic forecasters is that they will grow by 2.8 per cent in 1999, compared with a pick of 2 per cent three months ago and only 1.4 per cent at the height of the international crisis last year. It reflects improving confidence about the Asian economies.

Economists are also raising their sights for 2000, but more slowly. The consensus growth forecast is 2.6 per cent, up only marginally from 2.4 per cent early this year.

"We expect more significant upward revisions for the year 2000 to occur over the next few months," said Deutsche Bank chief economist Ulf Schoefisch.

Deutsche Bank's own forecasts were a little more optimistic that the consensus, he said, mainly reflecting a stronger forecast for the United States. "We expect 2.8 per cent trading partner growth in 2000 to follow a 2.9 per cent rise in 1999."

The July forecasts are significantly stronger than the April figures used by the Reserve Bank in its May monetary policy statement. At the same time the New Zealand dollar is weaker than the bank projected then.

"Given the stronger world growth outlook the Reserve Bank cannot argue the New Zealand dollar trend is matched by weaker international fundamentals, ie that it won't prove to be inflationary."

He expects the bank to start raising interest rates in November.