WELLINGTON, July 1 (Reuters) – New Zealand’s economic recovery has been delayed by the oil price shock and heightened global uncertainty, while inflation is expected to rise temporarily to around 4% in mid-2026, the International Monetary Fund said on Wednesday.
The IMF, in a concluding statement after its 2026 Article IV mission, said New Zealand’s recovery had been gaining traction in early 2026 after a prolonged period of weak growth, but disruption to global energy markets following the onset of the Middle East war had pushed up fuel prices and weighed on disposable incomes.
• New Zealand’s economy likely contracted in the second quarter of 2026, the IMF said, but projected growth would recover in subsequent quarters.
• The IMF forecast gross domestic product growth of 2.0% this year and 2.7% in 2027.
• Inflation, at 3.1% year-on-year in the first quarter, is expected to remain above the Reserve Bank of New Zealand’s target band until the end of the year, returning to the midpoint in the second half of 2027.
• Monetary policy should gradually withdraw accommodation and converge to a broadly neutral stance by end-2026, while remaining nimble if inflation pressures prove persistent, the IMF said. However, it added there was considerable uncertainty in defining neutral.
• The IMF said New Zealand’s 2026 budget appropriately balanced support for the recovery with medium-term consolidation, but added that fiscal buffers should be rebuilt as growth recovers.
• The IMF also urged structural reforms to lift productivity, deepen capital markets and improve housing supply.
(Reporting by Lucy Craymer; Editing by Jamie Freed)
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