The New Zealand government upgraded its economic and fiscal outlook on Wednesday as the economy rebounded from the Covid-19 restrictions.
According to the latest 2020 Half Year Economic and Fiscal Update, the economy will grow 1.5 percent over the year to June 2021 instead of a 0.5 percent contraction estimated in the Pre-Election Economic and Fiscal Update, or PREFU, released in September.
Finance Minister Grant Robertson said the government’s decision to act quickly in response to the global Covid-19 pandemic has contributed to a better than expected economic recovery.
The treasury said the fiscal outlook has improved mainly due to stronger economic activity than previously forecast.
The budget deficits have reduced in all years across the forecast period when compared to the PREFU. The budget deficit is seen at NZ$21.6 billion in the fiscal year 2021, NZ$16.4 billion in the fiscal year 2022 and NZ$10.3 billion in the fiscal 2023.
The pace of the reduction in the budget deficits is expected to be faster than previously expected.
In the final year of the forecast, a deficit of NZ$4.2 billion is expected, an average reduction per year of NZ$4.4 billion from the first year of the forecast compared to NZ$2.8 billion at the Pre-election Update.
As a percentage of GDP, net core Crown debt is expected to increase in the first half of the forecast period, peaking at 52.6 percent in 2022/23, before reducing to be 46.9 percent in 2024/25.
The unemployment rate is forecast to peak at 6.9 percent by the end of 2021, compared to 7.8 percent forecast in the pre-election update.
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