A new forecast for Taranaki's regional economy for the next 12 months finds the effects of Covid-19 will create the greatest economic shock in living memory, and could have a significant impact on the region.
The report, commissioned by Venture Taranaki and New Plymouth District Council, and undertaken by economists Infometrics, anticipates a 8.5 per cent contraction in regional GDP for the year to March 2021 – slightly worse than an 8.0 per cent drop forecast nationwide, while jobs are expected to decline 9.5 per cent in the region, against a 9.8 per cent drop nationally.
"The two main pillars of our regional economy, energy and food production, are expected to see mixed fortunes going forward," says Venture Taranaki chief executive Justine Gilliland.
"Internationally, we have seen a significant plunge in the commodity price for oil, and, compounded with Covid-19, the energy sector is expected to take the biggest hit of all our sectors in Gross Domestic Product terms, while food production and exports have remained strong and are forecast to stay that way."
She says Taranaki has a strong food production industry, which accounts for a significant proportion of the GDP and jobs.
"This economic backbone will play a pivotal role in our economic recovery and future growth.
"We are also less exposed than other regions when it comes to international tourism, where our proportion of domestic visitors is much larger than most other regions."
MBIE data shows that $429 million was spent by visitors to the region in the year to the end of January 2020, with $334 million or 77.9 per cent coming from domestic tourism.
"While this may offer little comfort to our region's tourism operators, it does send a more positive signal of recovery once domestic travel is safe and permissible. Other areas with a significant reliance on international tourism spend will find it harder to regain that momentum."
"International education will also be hard hit, though again not as hard as some other regions. The challenge is that this is income into our education providers who can utilize it to provide additional opportunities for local students."
The report estimates that 5500 jobs will be lost in the region over the next 12 months - over 9 per cent of Taranaki's workforce – and unemployment could rise to 10.1 per cent. The accommodation and food services, retail and wholesale trade and transport, postal and warehousing sectors are anticipated to be hardest hit. Construction is also expected to lose over 500 jobs.
Of particular concern is the potential impact to Māori employment, which is expected to remain at historic levels of double the regional unemployment rate.
"Under Alert Level 4, 56 per cent of the region's workforce was able to work, while 77 per cent are likely to be back at work, in a safely isolated way, under Level 3. This is better than the national rates, of 53 per cent and 74 per cent respectively, but the overall impact will be a reduction of $312 million in wages paid into the region over the coming year," Justine says.
The report offers a number of potential opportunities for recovery, with non-residential construction projects seen as a critical lifeline for both the construction sector and the regional economy, particularly the hospital redevelopment project.
"Outcomes such as lower housing prices, greater skill development, and retention and bringing forward of infrastructure projects have the potential to positively drive the economy beyond the next year," she says
"These align with the strategic projects and planning already well advanced with the Tapuae Roa and Taranaki 2050 work streams and will help to position Taranaki strongly as a desirable and progressive region when global fortunes and transit return to positive territory."
She says the paper also underscores the crucial importance of sustained investment in the region from local government.
"This is seen as a vital partner and enabler in growth projects, and national government though its ability to fund large-scale infrastructure projects.
"Equally important in this recovery mix is our personal behavior and making sustained efforts to spend locally wherever possible, whether that's a coffee, a big-ticket item, or holidaying domestically."
Justine says investing locally, in the communities right around the Maunga, will help to flatten the downward curve of almost every economic metric we monitor.
"The support we can give the Taranaki economy over the coming months will have a huge impact on our region's fortunes for generations to come."
"This report is a critical tool in Taranaki's planning and recovery from the impacts of Covid-19. In developing it with NPDC and Infometrics, we've now got a useful and grounded projection, which we must now actively and strategically work to improve."
"This means our region continuing to collaborate to mitigate the impacts and to accelerate our shaping of a better tomorrow for all."