Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with New Zealand recently. The IMF stated that tight monetary policy has helped bring inflation back to target, but at the expense of growth. Real GDP contracted by 0.5 percent y/y in 2024, as investment fell by 4.1 percent y/y, household consumption stagnated. The slowdown has been particularly pronounced in interest-rate-sensitive sectors including retail trade, construction, and manufacturing. The financial sector remains resilient despite rising non-performing loans. A recovery in external demand and improved terms of trade have helped narrow the current account deficit to 6.2 percent of GDP, though it remains above long-term trends.
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