Tick of approval from IMF for NZ's economy

New Zealand's economic growth is "solid" and is forecast to remain close to trend, the International Monetary Fund says.

But growing concerns about the global economy have increased the "downside risks" to New Zealand's outlook, the IMF's annual review of New Zealand's economy found.

"New Zealand's economic expansion is still solid. Despite the loss of momentum in economic activity and a cooling in housing markets, output has remained close to potential, and the unemployment rate has continued to decline," the ‘Article IV’ report said.

"Downside risks to the growth outlook have increased, reflecting: higher global risks; prospects for a weaker fiscal impulse given recent implementation lags; and the housing market cooling and morphing into an actual downturn.

"The current account deficit widened to 3.8 per cent of GDP in 2018, reflecting a decline in the terms of trade. The external position was weaker than implied by medium-term fundamentals and policy settings, while the New Zealand dollar was moderately overvalued," according to the report. 

The IMF praised the Government's Well being Budget, saying it struck the right balance between fiscal prudence and tackling the priorities like mental health, child poverty and Māori and Pasifika aspirations.

Finance Minister Grant Robertson said the report confirms the economy has strong fundamentals and showed the country was doing well against a backdrop of global uncertainty.

"Unemployment is at an 11-year low, the economy is growing faster than the likes of Australia, the UK and the EU, and the government is running a surplus and keeping debt under control in case of a rainy day.

"It's refreshing to see the international view of New Zealand's economy is positive. Despite some who will always take the glass half empty approach, we're doing relatively well against a backdrop of global economic uncertainty," Mr Robertson said.

Source: Breakfast