NZ Economic Growth 'Fastest in 6 Years' as Christchurch Construction Continues

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By Reissa Su | June 20, 2014 4:53 PM EST

The ongoing construction work in quake-damaged Christchurch has boosted New Zealand's economy growth to its fastest rate in six years.

REUTERS/ Christine Brooks
Dust rises from rocks were falling from a cliff in the Christchurch suburb of Sumner moments after an earthquake struck December 23, 2011.

According to the recently released figures by the Statistics New Zealand, the economy's growth rate had climbed 3.8 percent in the first quarter from the previous quarter in 2013.

Reports cited New Zealand's growth rate is the strongest compared to most developed nations which include Australia, Europe and the U.S. The high growth rate has prompted the Reserve Bank of New Zealand to increase interest rates three times within the year to reach the current rate of 3.25 percent.

The Reserve Bank forecast a moderate economic growth for New Zealand in 2015. Economists said the 3.8 percent growth in gross domestic product (GDP) is the "strongest" the country has ever recorded since the third quarter of 2007.

Compared to the previous quarter, GDP had increased 1 percent. For the first quarter of 2014, New Zealand's construction sector grew by 12.5 percent. The rate was the fastest it has ever been in the past 14 years. Home construction was up 31 percent in Christchurch alone and 12 percent for the rest of the country.

New Zealand exports increased 3.1 percent while mining climbed 6.3 percent. The positive figures were welcomed by New Zealand's National Party led by Prime Minister John Key. The party hopes to win a third term after the September elections.

The International Monetary Fund (IMF) had expected a 3.5 percent growth for New Zealand's economy for a year before getting back to a 2.5 percent average by 2016.

According to the International Monetary Fund (IMF), the country's economic expansion is being driven by favorable financial conditions, resurging construction activity, high commodity prices and sufficient increase in immigration.

Although the IMF views banks in New Zealand as sound and well-capitalized, it is concerned about the country's dependence on borrowing. The IMF report said it may be "a continuing source of risk" for New Zealand.

The biggest potential risks to New Zealand's economy are financial market volatility, drop in house prices and commodities, including sharp decline in China's growth.

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(Photo: REUTERS/ Christine Brooks / )
Dust rises from rocks were falling from a cliff in the Christchurch suburb of Sumner moments after an earthquake struck December 23, 2011.
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