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Economic Overview

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

New Zealand's GDP fell to -2.1% in 2020 due to the outbreak of the COVID-19. Nevertheless, growth came back to +5.6% in 2021 before decreasing to 2.3% in 2022. It should only reach 1.9% in 2023 and 2% in 2024 according to the updated IMF forecasts from January 2023. The country relies heavily on consumption to bolster its GDP, although low interest rates, a benevolent fiscal and monetary policy, and increases in real wages due to declining unemployment also factor into its economic growth. Its proximity to Asia and Australia, and strong agricultural sectors also strengthen the economy. The country's entrepreneurial environment is one of the world’s most efficient and competitive.

According to the IMF, the government balance closed at -5% of GDP in 2021 and -4.8% in 2022 and is expected to be reduced to -2.2% and then -1.4% in 2023 and 2024 respectively. Due to the pandemic, the national debt increased sharply from 43.2% of GDP in 2020 to 50.8% of GDP in 2021 and 56.6% in 2022. It is projected to increase again in 2023 to 58.6% before reaching 57.9% in 2024. The inflation rate remained low in 2021 at 3.9% but reached 6.3% in 2022. It is expected to come down to 3.9% and 2.6% over the next two years according to the latest World Economic Outlook of the IMF (January 2023). Inflation pressures have intensified over the past year as the pandemic has disrupted both demand and supply, and reached a 30-year high in February 2022 (New Zealand Treasury, 2022). Economic challenges include dependence on foreign investment, high household and corporate debt, reliance on Chinese demand, insufficient skilled workers, low R&D, and shortage of housing. The economy is also vulnerable to international commodity prices, particularly dairy and meat. Strong public funds have been allocated to reconstruction of roads, railways, and the KiwiBuild Programme. Furthermore, Government has restricted access to low-skill workers and student visas to ease housing demand, which triggered fears of worker shortage and lowered population growth.

In 2023, the country’s most immediate challenge remains related to the economic, social and public health impacts of the COVID-19 pandemic as well as the recovery from severe weather events and the consequences of the war in Ukraine. The unemployment rate increased from 4.2% in 2019 to 4.6% in 2020 but came down to 3.8% in 2021 despite the negative economic impact of the COVID-19 pandemic, and 3.4% in 2022. It is expected to reach 3.9% in 2023 and 4.1% in 2024. Some key social issues faced by the New Zealander government include dealing with an ageing population and increasing health care costs, boosting employment and household incomes, reducing teen pregnancy and child poverty, and increasing housing affordability.

 
Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 242.02249.42247.54256.36269.46
GDP (Constant Prices, Annual % Change) 2.71.11.02.12.2
GDP per Capita (USD) 47,22648,07247,22348,40750,361
General Government Balance (in % of GDP) -4.8-5.4-5.5-3.4-1.6
General Government Gross Debt (in % of GDP) 46.446.149.952.352.0
Inflation Rate (%) n/a4.92.72.52.3
Unemployment Rate (% of the Labour Force) 3.33.84.94.54.5
Current Account (billions USD) -21.87-19.67-16.15-15.22-13.96
Current Account (in % of GDP) -9.0-7.9-6.5-5.9-5.2

Source: IMF – World Economic Outlook Database , October 2021

Country Risk

See the country risk analysis provided by La Coface.

 

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Main Sectors of Industry

New Zealand's economy is based on agriculture and services such as tourism, retail, and wholesale trade. The agricultural sector is the largest industry in the country, with pastoral farming and horticulture being the most important categories. Agriculture represented 5.7% of GDP and 6% of the total workforce in 2022 (World Bank, 2023). Main agricultural products include dairy (the country is the 7th largest milk producer in the world in 2023), meat, wood, fruit (mainly peaches, plums, nectarines, drupe, cherries, apricots, and kiwi), vegetables, seafood, wheat, and barley. New Zealand also has a thriving wine industry and is rich in many natural resources, in particular gas, oil and coal. On average, migrants make up 15% of the agricultural workforce in New Zealand.

Industry represented 20.4% of GDP and 19% of the workforce in 2022 (World Bank, 2023). Main industries include log and wood articles, food processing, manufacturing, mining, transportation equipment, construction, aluminium production, and paper products. Prefabricated homes figure to factor strongly in New Zealand's housing and urban development programme.

The services sector represented 65.6% of GDP and employed 75% of the population in 2022 (World Bank, 2023). Main services include financial services, real estate services, and tourism - which is one of the most important sources of foreign currency. Other important sectors include retail and wholesale trade, restaurants and hotels.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 6.1 20.0 73.9
Value Added (in % of GDP) 5.7 19.7 66.7
Value Added (Annual % Change) -0.5 3.9 5.9

Source: World Bank - Latest available data.

 
Monetary Indicators 20162017201820192020
New Zealand Dollar (NZD) - Average Annual Exchange Rate For 1 USD 1.441.411.451.501.54

Source: World Bank - Latest available data.

 

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Foreign Trade

Foreign trade is an essential element of New Zealand's economy, which is one of the most open economies in the world. Trade represented 49% of GDP in 2021 (World Bank, 2023). In 2022, the main export goods of the country were milk and dairy products (25.5% of all exports), meat (6%), wood (4.9%), fruits (3.7%), while the main imported commodities include Petroleum oils and oils obtained from bituminous (9.6%), Motor cars and other motor vehicles principally (7.8%), Telephone sets, incl. telephones for cellular (2.5%), Motor vehicles for the transport of goods (2.5%) and Automatic data-processing machines and units (2.0%).

New Zealand's biggest partners are China (28.2% of all exports in 2022), Australia (12%), the United States (10.9%), Japan, and South Korea. China was also the main supplier of goods and services of the country (23.2% of all imports in 2022), with Australia (11.1%), the United States (9%) and Japan (6.2%).The country is a founding member of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). A Regional Comprehensive Economic Partnership (RCEP) - the world’s largest trade agreement - was also signed in 2020 which includes 7 of New Zealand top 10 trading partners and 16 countries in total: Australia, Brunei, Cambodia, China, India, Indonesia, Japan, Laos, Malaysia, Myanmar, New Zealand, Philippines, Singapore, South Korea, Thailand and Vietnam, and could eventually replace the CPTPP.  Additionally, the government is currently seeking trade deals with the EU and the UK.

Exports in New Zealand rose 13% year-on-year to a record high of 6.1 billion NZD in December 2021, boosted by sales of dairy products (Statistics New Zealand, 2022). In 2021, merchandise exports increased from 38.91 billion USD in 2020 to 44.75 billion USD, and imports increased from 37.15 billion USD in 2020 to 49.85 billion USD. The trade balance (including services) went from a positive territory in 2020 (+2.44 billion USD) to a deficit of 8.08 billion USD in 2021.

 
Foreign Trade Values 20182019202020212022
Imports of Goods (million USD) 43,79342,36337,15249,85554,219
Exports of Goods (million USD) 39,67339,51738,37744,77745,102
Imports of Services (million USD) 14,95815,56811,43013,67016,845
Exports of Services (million USD) 17,75517,41711,5799,82711,454

Source: World Trade Organisation (WTO) ; Latest available data

Foreign Trade Indicators 20182019202020212022
Foreign Trade (in % of GDP) 55.854.444.048.2n/a
Trade Balance (million USD) -3,523-2,4371,478-4,133-7,750
Trade Balance (Including Service) (million USD) -1631932,054-8,061-13,865
Imports of Goods and Services (Annual % Change) 3.91.0-15.917.3n/a
Exports of Goods and Services (Annual % Change) 2.8-0.2-17.61.4n/a
Imports of Goods and Services (in % of GDP) 27.927.122.226.0n/a
Exports of Goods and Services (in % of GDP) 27.927.321.722.2n/a

Source: World Bank ; Latest available data

Foreign Trade Forecasts 20232024 (e)2025 (e)2026 (e)2027 (e)
Volume of exports of goods and services (Annual % change) 7.49.27.44.35.1
Volume of imports of goods and services (Annual % change) 1.50.14.63.04.2

Source: IMF, World Economic Outlook ; Latest available data

Note: (e) Estimated Data

 
International Economic Cooperation
New Zealand has signed a free trade agreement (CEPA) with Hong Kong.
 

Main Partner Countries

Main Customers
(% of Exports)
2022
China 28.0%
Australia 12.1%
United States 10.8%
Japan 5.8%
South Korea 3.7%
See More Countries 39.6%
Main Suppliers
(% of Imports)
2022
China 23.1%
Australia 11.1%
United States 8.9%
South Korea 6.4%
Japan 6.3%
See More Countries 44.3%

Source: Comtrade, Latest Available Data

 

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Political Outline

Current Political Leaders
Queen: Charles III (since 8 September 2022)
Governor-General: Cindy Kiro (since 21 September 2021) 
Prime Minister: Christopher John Hipkins (since 25 January 2023)
Next Election Dates
General elections: on or before 13 January 2024
Main Political Parties
New Zealand has a multi-party system and the main political parties are:

- National Party: centre-right, conservative, liberal
- Labour Party: centre-left, social-democratic, social equality and universal rights

Other parties include:

- Green Party: left-wing, social-democratic
- New Zealand First: centre, conservative, nationalist, populist
- Maori Party: centre-left, maori rights
- ACT: right-wing, liberal

Executive Power
The head of State is the British sovereign represented by the Governor General. The head of Government is the Prime Minister, who is responsible for the legislature and is also the person who appoints the Governor General. The Cabinet is the most senior policy-making body and is led by the Prime Minister - who is the parliamentary leader of the governing party or coalition. The Prime Minister holds executive powers, which include the implementation of the law and running the day-to-day affairs of the country.
Legislative Power
The legislative authority is vested in a unicameral, 120-member House of Representatives. 72 members are directly elected by popular vote in single-member constituencies. These include seven Maori seats and 49 proportional seats chosen from party lists under the Mixt Member Proportional (MMP) system. The other seats are assigned to list Members of Parliament based on each party's share of the total party vote. All members serve three-year terms.
 

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COVID-19 Country Response

Travel restrictions
Regularly updated travel information for all countries with regards to Covid-19 related entry regulations, flight bans, test and vaccines requirements is available on TravelDoc Infopage.
To find information about the current travel regulations, including health requirements, it is also advised to consult Travel Regulations Map provided and updated on a daily basis by IATA.
Import & export restrictions
A general overview of trade restrictions which were adopted by different countries during the COVID-19 pandemic is available on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.
Economic recovery plan
For the general overview of the key economic policy responses to the COVID-19 pandemic (fiscal, monetary and macroeconomic) undertaken by the government of New Zealand, please consult the country's dedicated section in the IMF’s Policy Tracker platform.
Support plan for businesses
For an evaluation of impact of the Covid pandemic on SMEs and an inventory of country responses to foster SME resilience, refer to the OECD's SME Covid-19 Policy Responses document.
You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.

 

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