The Hawke's Bay economy will soon be outperforming the rest of New Zealand, says a leading New Zealand economist.
Infometrics managing director Gareth Kiernan claims Infometrics has the best GDP model in the country and Hawke's Bay growers would soon be the engine of growth.
Visiting Hawke's Bay for a New Zealand Post breakfast yesterday, he said growth would be seen in traditionally-strong farming sectors along with wine, healthcare, dairy and manufacturing.
The current drought "has thrown a spanner in the works" but the outlook was "pretty positive for Hawke's Bay over the next few years".
"It has been up and down and pretty tough - through 2010-2011 in particular - but we are expecting it to outperform the national economy over the next couple of years."
The tide was already turning in some sectors.
"In the horticulture sector we see prices up 10 per cent on real terms on last year - mitigated a bit by the high New Zealand dollar - but international prices for those products have been improving," he said.
China was showing strong demand for lamb but traditional markets were soft.
"It is encouraging that some of those Asian economies are starting to pick up more and more of our meat and certainly for the last month the meat export figure was amazing ... just how much meat was sent off to China in particular.
"Unfortunately China doesn't give the premium price that you can get out of markets such as the UK but demand is picking up which hopefully will lead to better prices over the medium term."
Beef prices had fallen because of droughts in the US and New Zealand and increased numbers were being sent to slaughter.
There was demand for wine from North America "but unfortunately Europe is still pretty soft".
He said the Hawke's Bay's population last year shrank for the first time in 13 years.
"We saw more people leaving the region to go to other parts of the country but most critically, people are going overseas, probably to Australia."
But with Australia's unemployment rate rising, he expected that flow to slow.
The housing market in Hawke's Bay had not shown the price recovery of the main centres and while sales volumes had improved they were still below historical averages.
A lift in the retail sector over the next two years, on the back of an improved agricultural sector, was predicted.
"We'll see that earlier than other regions."
He said the dairy sector had already received "its chunk" of the global economic recovery which would come through in other agricultural areas.
"A projected change in land use through irrigation would also help."