- Q4 GDP data due Thursday from 10:45 NZDT (21:45 GMT)
- Domestic demand seen buffering dairy slump
- Weak NZ dollar boosts tourism
- Current account deficit seen at NZ$7.9 billion y/y
Booming tourism and solid construction activity are expected to have driven respectable fourth-quarter growth for New Zealand’s economy, offsetting a slide in the once-flourishing farm sector.
Economists polled by Reuters expect the economy to expand 2.0 percent on the year in the fourth quarter while quarter-on-quarter growth is expected to be 0.6 percent. [NZ/POLL]
"We have obvious challenges across dairying, but by-and-large the remainder of the economy is in good heart," said ANZ Chief Economist Cameron Bagrie.
The Reserve Bank of New Zealand has forecast the economy would expand 0.7 percent in the quarter. Last Thursday the central bank surprised markets with a 25 basis point rate cut to a record low 2.25 percent in a bid to jump-start tepid inflation.
BNZ Senior Economist Doug Steel is also expecting the economy to expand 0.7 percent on quarter and said the services sector was a strong contributor "ably supported by expansion in construction and manufacturing." He tips the primary sector to remain broadly flat.
The economy grew 0.8 percent on quarter in December 2014 and 3.5 percent on the year.
Until recently, dairy was the backbone of the country's economy, representing around 25 percent of exports. But dairy prices have tumbled by more than half since early 2014, hurt by China's economic slowdown and global oversupply.
Growth, however, has been partly compensated by a record high tourism, a weaker New Zealand dollar and low interest rates.
Economists will be watching for Wednesday's balance of payments data for any further clues on what the fourth quarter GDP might look like, reflecting the major contribution from net exports.
The current account deficit is expected to be NZ $7.9 billion New Zealand dollars ($5.2 billion) in the year to December and NZ$2.8 billion in the fourth quarter, according to the poll.
BNZ's Steel notes the current account deficit remains smaller than its historical average which is surprising given the hit to dairy export revenue in recent months.
"It highlights the degree of strength elsewhere like the tourism sector and exports of services more generally, including education," he said.
The current account deficit was NZ$3.19 billion in the fourth quarter of 2014 and was a deficit of NZ$7.8 billion in the year to December 2014.
(NZ$1 = $0.66)
