NZ economic uncertainty soars, business optimism dips

NZ economic uncertainty soars, business optimism dips: international business report

22 January 2019

Following a period of heightened optimism and strong economic growth, the outlook for businesses internationally in 2019 is declining as the global economic cycle cools and political uncertainty sets in, according to research from Grant Thornton’s International Business Report (IBR).

The research, which gathers responses biannually from business leaders in 35 economies, found that global economic uncertainty is now sitting at 50%, a significant increase from 28% in Q1 2018, and the weakest result in six years. Optimism throughout the global economy has also plummeted from 61% in Q1 2018 to 39% in the latest survey.

New Zealand business leaders’ sentiments are following suit; survey results revealed that economic uncertainty has soared to 43% from 10% in the last year, and optimism has dipped to 70% from 76% in the same period.

“The latest IBR results demonstrate that business leaders know they won’t have it as good as they did in 2018”, says Paul Kane, Business Advisory Services Partner at Grant Thornton New Zealand.

“Although it may seem counter intuitive, this point in the economic cycle presents the perfect opportunity to invest in capabilities and infrastructure, rather than following the traditional course of shoring up operations and reducing or even ceasing investment.

“But there is some good news. Despite increasing volatility in international financial markets, forecasted GDP growth in goods and services sectors will contribute to optimism among business leaders as they know their business will grow with it.

“Another positive is that our neighbours have bucked the global trend; optimism in emerging APAC* is at 57% and is most likely a result of integration and collaboration throughout south-east Asian economies. These countries are reducing their reliance on trade with China whose economic slow down is beginning to have knock on effects.

“Strategic investment is the best way forward for businesses. This IBR report has also revealed a promising climb in R&D investment expectations among kiwi businesses surveyed, possibly due to the tax incentives which are expected to be available from the beginning of April.

“Whichever strategy businesses choose to adopt, the time for implementation is now,” says Kane.

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