BNZ eyeing the confluence of the drought and coronavirus impacts
- And assess a recession as plausible
- But recession is not their central forecast
Past experience shows us that a wide-spread drought can take 0.5 to 1.0% off GDP.
- The risks are clearly for a bigger effect than we are assuming.
- To put the potential drought impact in perspective, it is of a similar magnitude as we are talking about for the coronavirus. Similarly, we have been conservative in our coronavirus assumptions so far. What makes things worse is that the two issues run headlong into each other to cumulatively exacerbate each other's impact.
