New Zealand’s economy contracted by 0.6% in the fourth quarter of 2022, according to the country’s National Bureau of Statistics. This was worse than the 0.2% contraction analysts had expected and was a sharp contrast to the revised 1.7% growth in the previous quarter. The weak GDP figure has prompted speculation that the Reserve Bank of New Zealand (RBNZ) will slow down its rate hike plans.
Full-year growth in 2022 slowed to 2.2%, as basic industries and manufacturing shrank. The chief economist of the Vespac Institute New Zealand noted that the disappointing GDP data indicated that the economy had grown significantly less than expected by the RBNZ. This could prompt the central bank to slow down its efforts to control inflation by inducing a mild recession.
The RBNZ had expected GDP growth of 0.7% in the fourth quarter and is aiming for interest rates to peak at 5.5% in Q3/2023. However, the weak economic data may force the bank to rethink its plans.