IMF: New Zealand’s economy is in the midst of a necessary, policy-induced slowdown

In its Staff Concluding Statement of the 2023 Article IV Mission for New Zealand, the International Monetary Fund (IMF) noted that “New Zealand’s economy is in the midst of a necessary, policy-induced slowdown following the strong post-pandemic recovery.”

Key takeaways

“New Zealand is likely to continue slowing in the near term as monetary tightening takes hold. Inflation is declining but will remain high for a while. The current account balance has deteriorated significantly, reflecting excess demand and one-off factors.”

“Macroeconomic policies should retain a restrictive bias. Fiscal policy should prioritize the recovery from the floods and cyclone, while limiting other discretionary spending. The monetary policy stance is appropriate and should aim to bring inflation to target.”

“The financial sector remains sound with ample capital and liquidity levels.”

Market reaction

The NZD/USD pair is unfazed by the above report, trading 0.13% higher on the day at 0.6158, as of writing.