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 | 2020 | 2021 | 2022 (E) | 2023 (E) | 2024 (E) |
| GDP (billions USD) | 210.09 | 249.31 | 241.94 | 251.97 | 251.40 |
| GDP (Constant Prices, Annual % Change) | -1.5 | 6.1 | 2.4 | 1.1 | 0.9 |
| GDP per Capita (USD) | 41,309 | 48,778 | 47,208 | 48,827 | 48,343 |
| General Government Balance (in % of GDP) | -4.3 | -4.4 | -5.3 | -4.5 | -3.1 |
| General Government Gross Debt (in % of GDP) | 43.3 | 50.1 | 52.8 | 49.9 | 45.5 |
| Inflation Rate (%) | 1.7 | 3.9 | 7.2 | 5.5 | 2.6 |
| Unemployment Rate (% of the Labour Force) | 4.6 | 3.8 | 3.3 | 4.3 | 5.3 |
| Current Account (billions USD) | -2.18 | -14.91 | -21.49 | -21.60 | -18.15 |
| Current Account (in % of GDP) | -1.0 | -6.0 | -8.9 | -8.6 | -7.2 |
Source: IMF – World Economic Outlook Database , October 2021
Country Risk
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