Bleak outlook for economy in 2009

High consumer debt and falling house prices, exports and incoming tourist numbers make for a bleak economic outlook in New Zealand in 2009, according to business consultancy firm Dun & Bradstreet (D&B).

World economic growth will fall 1 percent in 2009 before rebounding 2.1 percent in 2010 and New Zealand's growth will "slow sharply" during the year, D&B said in its Economic and Risk Outlook Report released today.

Global trade conditions were expected to deteriorate further and bankruptcies and late payments would rise, the report said.

The outlook in New Zealand was "pessimistic" because consumers have high debt levels, house prices were falling and the export and tourism sectors faced negative conditions in the months ahead.

Also, the asset-based savings model which has been popular here has been "widely discredited", D&B said.

"Demand from Asia is critical to New Zealand's economic prosperity.

"However, with this demand expected to decrease markedly and default risks likely to rise, New Zealand's exporters will be hard hit in 2009," D&B corporate affairs director Damian Karmelich said.

He said regardless of fiscal and monetary policy changes there was a tough year ahead for local businesses.

There would be a need for "structural adjustment" in countries such as New Zealand, Australia, the United States and the United Kingdom where growth was underpinned by increased housing wealth and credit financed consumer spending.

"Those countries that need to wean themselves from easy credit and from the dominance of the financial sector for growth, jobs and tax revenue will face the most significant challenges in 2009," Mr Karmelich said.

These countries would be more affected by the global credit crisis and take longer to recover, he said.

- NZPA