China Slump is NZ's Greatest Risk - D&B

China Slump is NZ's Greatest Risk - D&B

March 24 – Slumping growth in China is cited as New Zealand's greatest economic risk, according to Dun & Bradstreet.

The credit reporting company lowered the risk rating on 70 countries in the past six months and expects to downgrade more economies this year, it said in a statement. Global trade will fall 9% this year, the biggest decline since the Great Depression, it said.

“While there are a number of concerns for New Zealand, the most significant will be the decline in forecast economic growth for China, which has fuelled much of the world’s growth over the last decade,” D&B said.

The firm is forecasting China’s economy will grow 3.5% this year, much less than the 8% annual growth China targets. A rally in Chinese stocks is a “bear market rally” and a surge in new lending may have found its way into the sharemarket or term deposits rather than to fund corporate capital spending, it said.

As economies falter, protectionist trade policies are on the rise with further impacts likely as countries bail out their banks while imposing restrictions on overseas lending, D&B said. It cited the ‘Buy American’ clause being promoted in the U.S. Congress as part of the Obama administration’s US$787 billion stimulus package.

Government figures on Friday are expected to show the New Zealand economy shrank 1% in the fourth quarter, based on a Reuters survey, worse than the 0.8% contraction the central bank predicted this month, when it lowered the official cash rate 50 basis points to a record low 3%. Some economists predict the OCR will bottom out at 2% by mid-year.

Following is D&B’s forecasts for 2009 and 2010 economic growth:

Country % GDP Growth 2009 % GDP Growth 2010
Australia -0.2 1.3
U.S. -1.5 1.3
U.K. -3.4 0.7
China 3.5 5.0
Japan -3.8 1.0
India 6.1 7.0
Vietnam 4.5 5.0
New Zealand -1.0 1.8

(Businesswire)

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