GDP forecast slashed amid rising global risks
Infometrics has revised down its GDP forecast for 2026, predicting the economy will grow by just 1% per annum, compared to its previous projection of 2.4%.
The downgrade, amid rising pessimism among Kiwi businesses and property investors, reflects growing uncertainty triggered by the escalating global trade war—particularly between the United States and China.
“There is an incredibly high level of uncertainty around the global economy at the moment, with a mounting probability of a global recession due to the tariffs proposed by US President Trump,” said Infometrics chief forecaster Gareth Kiernan (pictured).
“The blanket tariffs of 10% announced for all imports to the US, alongside the much higher tariffs imposed on China, are set to significantly slow economic growth in the world’s two largest economies.
“The ‘on again, off again’ nature of the tariffs is also creating a difficult environment for businesses to make investment and hiring decisions with any confidence.”
Export slowdown to weigh on recovery
Infometrics warned that New Zealand’s export growth could fall close to zero over the next 18 months as global demand weakens and tariffs increase input costs across major trading partners.
Previously, strong international demand and elevated export prices were expected to play a central role in lifting the domestic economy.
“Faced with this weaker economic outlook, the balance of risks has tilted towards further interest rate cuts by the Reserve Bank,” Kiernan said.
“However, given the lower exchange rate and the potential for higher imported inflation, we forecast that inflation will push up to 2.8%pa later this year.
“As a result, we expect the bank to cut the official cash rate to 3% by July, but any further reductions will be dependent on expectations for lower, more favourable inflation outcomes.”
Patchy recovery risks delayed until 2027
Although New Zealand showed signs of emerging from a prolonged economic slump in late 2024 and early 2025, recent global market turmoil is now threatening to reverse that progress.
A broader and more robust economic recovery could be delayed until at least 2027, according to Infometrics.
“We’re conscious that the ground has shifted rapidly over the last two weeks and could continue to do so,” Kiernan said.
“This forecast represents our current assessment of the outlook for the New Zealand economy, but we’re alert to the fact that the outcomes of global economic instability, and people’s reactions to this changing environment, will continue to evolve.”
Global downturn could hit Labour and housing markets
Beyond slowing growth, the trade war underscores New Zealand’s heavy dependence on exports—particularly to China—for economic momentum.
Infometrics warned that the global downturn could have broader consequences for employment and housing.
“The trade war has highlighted New Zealand’s reliance on exporting to generate sustained economic growth and our dependence on China as an export market,” Kiernan said.
“Most Kiwis will not be directly affected by American trade policy, but the implications of a global downturn are potentially wide-reaching outcomes for more tangible areas such as the New Zealand labour market and housing market.
“The global volatility could not have come at a worse time, given that New Zealand was just starting to emerge from two years of flat or declining economic activity.”
