Kiwi businesses should make the most of Rugby World Cup visitors - tourism is tipped to take an instant hit during what the International Monetary Fund (IMF) says is a "dangerous new phase" for the world economy.

The international lending organisation has sharply downgraded its economic outlook for the United States and Europe until the end of next year, expecting the US economy to grow just 1.5 per cent this year and 1.8 per cent next, instead of its June forecast of 2.5 and 2.7 per cent respectively.

Financial turmoil and slow growth are feeding on each other in the United States and Europe, IMF officials say, with Europe's debt crisis causing banks to reduce lending and hold on to cash.

New Zealand Institute of Economic Research principal economist Shamubeel Eaqub told APNZ New Zealand can expect to be affected by global trends because it has a small, open economy.


The most notable and immediate effects would be in the export and tourism sectors; a slowdown in demand from struggling overseas economies had a direct consequence here.

"When global growth slows, what tends to happen is fewer people come to New Zealand. We are very far away, we are very expensive," Mr Eaqub said.

"If you're losing your jobs in Europe and the United States, you probably aren't going to come on a very expensive holiday to the other side of the world."

Tourism was a big export for New Zealand, rivalling dairying in foreign exchange earnings, so any slowdown would be felt throughout the economy; the most obvious result being job losses.

"For tourism the big risk is we don't get as many of the high-spending, long-staying tourists, (who are) obviously very good for the New Zealand economy."

The export sector, particularly non-food products manufactured here, would also feel an immediate export as people tightened their belts.

For the rural export sector, which produced mainly food-based products, the outlook was better but lower prices were likely, Mr Eaqub said.

The biggest unknown was around lending and what it would cost.

"When there is a slowdown in the global economy, and especially if it is disruptive like during the global financial crisis, what can happen is our banks have more difficulty raising funds," he said.

"The consequence of that is the cost of borrowing in New Zealand tends to go up and there is less money available to be lent out to kiwis."

However, Mr Eaqub said people should not panic as there was nothing yet to suggest banks were finding it hard to get money, or that the cost of borrowing had increased.

The Reserve Bank last week kept the Official Cash Rate at 2.5 per cent and it is widely predicted to stay there for the next six months.

The IMF has 187 member nations, conducts economic analysis and lends money to countries in financial distress.

It will hold its annual meetings with the World Bank later this week in Washington.