This as COVID-19 spirals out of control in China
New Zealanders should gear up for a longer and tougher recession due to the explosion of COVID-19 cases in China, an economist has warned.
An estimated 300 million in China have fallen victim to the deadly virus since the Chinese government abandoned its zero-COVID policy last month, impacting supply chains and manufacturing.
Three-quarters of staff in some Chinese factories are now unable to work due to the disease spiralling out of control, causing manufacturing output to plunge; and for the first time in 40 years, China’s economic growth could be at, or below, the rest of the world’s, Newshub reported.
And that’s bad news, according to Brad Olsen, Infometrics principal economist.
“Although we were already expecting recession across the world in 2023, this recession could go longer and stronger because of how weak the Chinese economy is starting from,” Olsen said.
He said this could lead to a worse-than-forecast recession in New Zealand.
“We could see a harder economic hit in New Zealand, and also across wider Asia Pacific in the early stages of this year,” Olsen said.
This view was shared by Australia’s treasurer, Jim Chalmers, who tagged China’s outbreak as one of the largest economic risks of 2023.
“There will be broader economic consequences from this quite extraordinarily large wave of COVID,” Chalmers said.
With New Zealand importing more than $16bn of goods and services from China, Kiwis’ cost of living would likely keep on rising as the pandemic puts pressure on the Asian giant’s supply chains and manufacturing.
“We do worry that we might see even higher price spikes,” Olsen said.
On the plus side, Catherine Beard, director of advocacy for BusinessNZ, said the reopening of China’s border yesterday is anticipated to provide a much-needed boost.
“I think it'll be really positive for the New Zealand economy because, really, tourism, and international students were a huge part of our export earnings, and that’s left a big gap in our export receipts,” Beard said.
It won't all be smooth sailing though.
“Yes, it'll be rocky, but we think that'll come right,” Beard told Newshub.
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