NZ's economic prospects hinge on how Asia weathers storm

New Zealand's economic health will depend on how well Asia weathers the impending financial storm, say local commentators.

World Bank President Robert Zoellick said yesterday that the global economy had entered a new "danger zone" as fear grew that Europe and the United States could fall into recession once again. Bank of New Zealand senior economist Craig Ebert said he was taking the situation very seriously.

"This is clearly more than just another scare like we've seen in the last few years in the so-called recovery phase [from the global financial crisis]. The world's waking up to the bigger, deep-seated problems that it still has," Ebert said.

If the global situation worsened, a lot of how New Zealand fared would depend on what happened in the "up and coming" markets in Asia, he said.

ASB chief economist Nick Tuffley said Asia was crucial because it was a key destination for New Zealand exports.

"As things stand about two-thirds of our exports go to the Asia-Pacific region. Most of the growth in our export market is coming from Asia. The US and Europe, while they roughly take about 20 per cent of our exports, we're not really getting the growth out of them and demand has been weak because of their sluggish economies and the challenge our [high] exchange rate has been posing," Tuffley said.

Although New Zealand would likely take a hit if Europe and the US fall into recession, ANZ New Zealand's chief economist Cameron Bagrie said the country would be better off than many others.

However, Bagrie said global unease was centred on the ability to borrow and New Zealand's reliance of overseas credit could be its "Achilles heel".