POLL-Australia’s economic recovery threatened, slow vaccinations the main risk
Band Vivek Mishra
BENGALURU, July 21 (Reuters) – Australia’s economy will be hit this quarter by renewed lockdown restrictions in an attempt to contain rising coronavirus cases, according to a Reuters poll of economists which said a snail-pace vaccination rollout was the main risk to growth.
After recording unprecedented growth since 1991, the economy contracted 2.4% last year amid the COVID-19 pandemic as borders and businesses were closed, but monetary support and Fiscal supported the A $ 2 trillion economy.
An increase in new COVID-19 variants in Sydney, Australia’s most populous city, and in several states threatens an economic recovery in the coming quarters.
While only three economists in the July 7-20 poll expected a contraction this quarter, the consensus pointed to a sharp deterioration. Growth is now expected at 0.1% quarter on quarter against 0.9% forecast in an April poll.
If achieved, it would be the weakest growth since the Australian economy emerged from recession a year ago. Forecasts ranged from -0.6% to 0.8%.
âSydney’s lockdown could see third-quarter GDP growth turn negative if the lockdown lasts six to eight weeks,â said Tapas Strickland, an economist at the National Australia Bank.
“A prolonged worst-case lockdown … means a potential impact of $ 4.2-5.6 billion on GDP. Such an impact is likely enough for third-quarter GDP growth to temporarily fall into negative territory. , with the drag approaching 1 percentage point of activity and producing a Q3 GDP impression of -0.1% to -0.2%. “
The economy is expected to grow 1.1% in the next quarter, up from 0.8% in the last poll. Growth is forecast at 4.9% per year this year, the fastest pace in more than two decades. But it is expected to drop to 3.3% next year, then to 2.9% in 2023.
“We expect the blow to the economy to be a bit weaker, as economic activity has become more resistant to lockdowns and activity is expected to rebound quickly once restrictions are relaxed,” said David Plank, Head of Australian Economy at ANZ.
When asked what was the biggest risk to the economy this year, 10 of 14 economists said vaccination rates were slow. The other four have reported a spread of new variants of COVID-19.
The nation has been widely praised for its success in reducing the spread of COVID-19 and limiting deaths, which were far behind its peers, but only 11% of Australians have been fully vaccinated.
“COVID-19 and the implications of slow vaccine deployment have come back to the fore recently. The current COVID-19 outbreak shows how only a small number of cases can still have economically significant effects,” said Jamie Culling, Economist. at HSBC.
âLockdown and movement restrictions remain key tools in tackling the virus, given vaccination rates still quite low. It also illustrates the difficulty Australia will face with a wider reopening of the international border – which we see as a significant obstacle to growth. “
The Reserve Bank of Australia had forecast growth of 2.25% for the second half of this year, but that looks questionable, indicating that rate hikes remain a distant prospect.
RBA Governor Philip Lowe, who took his first step in cutting massive central bank stimulus earlier this month as employment turned out to be much stronger than expected, said that a modest decline in bond purchases was not a withdrawal of support.
Interest rates were to stay at at least 0.10% until the end of next year and there were some expectations that the RBA would reverse its cut decision at its August 3 meeting.
(For other articles from Reuters Global Economic Survey)
Reuters poll chart on economic growth, monetary policy and inflation outlook in Australia:https://tmsnrt.rs/3eE3xBo
Reuters survey chart on Australia’s economic outlook:https://tmsnrt.rs/3wN5jGl
(Reporting by Vivek Mishra; Poll by Md. Manzer Hussain, Sujith Pai and Shaloo Shrivastava; Editing by Jonathan Cable and Alex Richardson)
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