The bank predicts the country’s GDP could shrink by 2% early next year.

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The Auckland Savings Bank (ASB) recently made a forecast that New Zealand is headed for an even deeper recession than previously predicted. According to ASB, the country’s economy is expected to shrink by 5.5% in 2020, more than the 4.5% contraction that was forecast just a few months ago.

The reason for the gloomier outlook is the ongoing impact of the COVID-19 pandemic. New Zealand’s strict lockdown measures, while successful in suppressing the virus, have had a significant impact on the economy. Many businesses have had to close temporarily while others have been forced to lay off staff. The lack of international tourism has also had a huge effect on the country’s economy, which is heavily reliant on the sector.

ASB predicts that unemployment will rise to 7.5% by the end of the year, up from the current rate of 4.0%. This is a worrying trend, as unemployment can have a wide range of negative impacts on the economy and society.

The government’s response to the crisis has been to provide support to businesses and individuals affected by the pandemic. This includes wage subsidies, tax relief, and interest-free loans. While these measures have been helpful, they may not be enough to prevent a deep recession.

ASB’s forecast is similar to that of other financial institutions. The International Monetary Fund (IMF) recently predicted that the global economy will contract by 4.9% in 2020, and the New Zealand Treasury predicts a 4.6% contraction.

However, it’s important to remember that forecasts are just that – predictions. The economy could end up performing better or worse than expected depending on a wide range of factors, including the progression of the pandemic, the effectiveness of the government’s response, and global economic conditions.

Despite the challenging economic conditions, there are reasons for optimism. New Zealand has a strong history of resilience and innovation, and the government’s response to the crisis has been widely praised. If businesses are able to adapt to the new reality of the pandemic, and if the government’s support measures continue to be effective, it’s possible that the country could emerge from this crisis in a stronger position than before.

In conclusion, the ASB’s forecast of a deeper recession for New Zealand is concerning but not surprising given the ongoing impact of the COVID-19 pandemic. While there are reasons to be cautious, it’s important to remember that forecasts are just one aspect of the complex and ever-changing economic situation. The country will need to continue to respond proactively and creatively in order to mitigate the impact of the pandemic and get back on a path of sustainable economic growth.