How coronavirus has affected the New Zealand economy so far

The coronavirus has already had a big impact on the local economy. Photo / Bloomberg

From meat exports to tourism, the outbreak of coronavirus in China - New Zealand's biggest trading partner - has already had a big impact on the local economy.

As the death toll from the virus continues to mount, economists are already trimming their growth forecasts.

ASB expects New Zealand's GDP to take a 0.6 per cent hit in the first quarter of this year and says that if the outbreak worsens or spreads to New Zealand, the impact "could be more enduring and widespread".

Finance Minister Grant Robertson says the latest Government accounts are in good shape, but coronavirus is expected to knock the economy in the coming months.

"At the halfway point of the [financial] year, the books are in good shape. There is normally movement in these numbers across monthly accounts, but that will be exacerbated in the second half of the year by the impact of coronavirus," Robertson said this week.

"Agencies are currently assessing the potential economic impact of the coronavirus outbreak and while that work is not yet completed, it is clear that there will be some impact on the New Zealand economy."

The Reserve Bank this week opted to keep its official cash rate unchanged at 1.0 per cent but said the disease outbreak in China was "a downside risk" to the local economy.

Governor Adrian Orr said monetary policy had time to adjust to the impact of coronavirus, if needed.

Aside from the bank's comments on the outbreak, the tone of its statement was upbeat, but private sector economists weren't so sure.

"Our more up-to-date estimate of the economic impact on New Zealand of the virus is 0.6 percentage points rather than the 0.3 percentage points the Reserve Bank has factored in," says ASB chief economist Nick Tuffley.

"The risks are skewed to a prolonged period before New Zealand sees a noticeable rebound in its key export earnings."

The New Zealand dollar has been falling since late January, when the severity of the outbreak was becoming clearer, but the Reserve Bank's take on the current state of play has resulted in the currency rebounding.

Chinese New Year celebrations had to be severely curtailed as people were discouraged from gathering.

The holiday had been extended to February 10, but in parts of China, the break could be extended further to try to impede the spread of the disease from its epicentre, Wuhan.

For many businesses, Chinese New Year is the busiest time of the year.

Ratings agency S&P Global Ratings has lowered its forecast for China's 2020 GDP growth to 5.0 per cent, from the initially projected 5.7 per cent, because of the outbreak.

"China accounts for one-third of global growth so a 1-percentage-point slowdown in the country's growth rate is likely to have a material effect on global growth," S&P said in a report.

Most of the outbreak's impact on the Chinese economy will be felt in the first quarter, says Shaun Roache, Asia-Pacific chief economist for S&P Global Ratings. A firm recovery may only take hold in the third quarter, he believes.

The following articles outline how individual New Zealand businesses and sectors have been affected so far.

Education
New Zealand's universities say they face a huge financial hit from coronavirus, with more than 6500 Chinese students who are enrolled to study here this year still stuck at home. Sector group Universities New Zealand says just over half of the 12,700 Chinese students who were due to study at one of its eight member institutions have been unable to come to New Zealand because of the travel ban.

Ports
The coronavirus scare will hit Port of Tauranga export volumes "no question", but the fallout will be short-term, says chief executive Mark Cairns. The outbreak has brought New Zealand's second biggest log-exporting port - Gisborne's Eastland Port - to its knees. Log exports are the port's main source of revenue. Meanwhile, Wellington's port company CentrePort is bracing for a sharp downturn in log and meat exports, warning that customers are deeply nervous about the impact of coronavirus. The port says log volumes are falling, while exporters in the log and meat sectors are reporting cancelled orders. "We're seeing nervousness, the type of nervousness we haven't seen before," says the port's commercial manager, Andrew Locke, who has worked in the port industry for 27 years.

The coronavirus outbreak has brought New Zealand's second biggest log-exporting port - Gisborne's Eastland Port - to its knees. Photo / File

Seafood
The Government has said it would allow live crayfish exporters to return the delicacy - currently being held in tanks - to the sea. Between 150 and 180 tonnes of live crayfish, or rock lobster, are being held in New Zealand in pots and tanks, at sea and on land, after export orders were cancelled by Chinese distributors in response to the coronavirus outbreak.

Dairy
Wholemilk powder prices dropped by 6.2 per cent at the latest Global Dairy Trade auction - the first to be held since the escalation of coronavirus in China that has driven widespread volatility in markets around the world. Uncertainty created by the virus outbreak is weighing on the dairy market but drought at home is a more immediate threat, says ratings agency Fitch. Fonterra - New Zealand's biggest dairy exporter - has seen its share price come under renewed downward pressure.

Fonterra's share price has come under renewed downward pressure. Photo / File

Meat
New Zealand sheepmeat and beef prices have fallen by about half since hitting record highs last year, with the outbreak of coronavirus in China adding fuel to the decline. Prices were on a roll throughout most of last year, hitting records going into the fourth quarter, but Chinese Government intervention, followed by the outbreak, and increased competition from other beef exporters, have seen them come off by about 50 per cent.

Last year, NZ sheepmeat and beef exports jumped 6 per cent to $9.1 billion, according to the Meat Industry Association. That growth was largely the result of the growth in overall exports to China, which increased by 57 per cent to reach $3.7b. Sheepmeat exports to China grew by 40 per cent to $1.6b, and beef exports by 113 per cent to $1.7b.

Tourism
Tourism operators are bracing for a ''significant'' hit from the impact of coronavirus on the Chinese market, with one economist forecasting a 5 per cent fall in overall tourist arrivals. The Chinese Government ban on travel by groups and flight and hotel package tourists covers up to 90 per cent of holidaymaker arrivals from that country. More than 400,000 Chinese visit New Zealand a year, most on holiday, and they spend more than $1.5b, making them this country's second biggest market behind Australia.

Forestry
The virus outbreak in China has hit the New Zealand forestry sector just as it was starting to recover from last year's price slump. By late last year, New Zealand log prices in China were improving, restoring a little confidence. The coronavirus outbreak has forced more than 1000 New Zealand forestry workers out of a job. The Forest Industry Contractors Association says about 30 per cent of the country's logging crews are unable to work amid supply chain disruption and no one knows how long the situation will last.

New Zealand's forestry sector has taken another blow just as it was starting to recover from last year's price slump. Photo / File

Hotels
Millennium & Copthorne Hotels New Zealand says it is already taking a hit to revenue in the first quarter of this year due to cancellations stemming from coronavirus.

"A number of our hotels in high tourism areas are receiving cancellations from several Chinese operators as the Chinese and New Zealand governments' travel bans and other containment measures come into effect," the company said after reporting a preliminary net profit of $49.7 million for the year ended December 31.

"Cancellations received to date will result in revenue loss of between $2m and $3m with more cancellations expected for future months. We have been advised that this revenue loss will not be covered by insurance."

Airports
Analysts say the virus outbreak will weigh on Auckland Airport's share price, but see no signs of any long-term impact. Direct flights between Auckland and mainland China account for 8 per cent of total international seat capacity at the airport, but much of this is disappearing as airlines including Air New Zealand and the biggest operator, China Southern, suspend flying until the end of next month.

Morningstar's regional director Adam Fleck says the Sars outbreak of 2003 presented a comparable case, showing a strong near-term traffic decline but quick recovery. But he warns of potential for greater downside risk than from Sars - which had a higher mortality rate. This could be felt in a hit to retail revenue.

Infant formula
Infant formula supplier Synlait Milk says it will not achieve previously advised earnings growth in the current year as a result of "significantly lower" infant powder base sales due to market consolidation in China. Synlait says the possible impacts of coronavirus were factored in to the forecast, but it is not the sole reason for the downgrade.