World growth was set to drop to its lowest level in 10 years and no region would escape the fallout from the credit crisis, credit reporting and business intelligence firm Dun and Bradstreet said yesterday.
The firm's latest economic and risk report said the international credit crisis dominated the current risk outlook more than any risk factor since the early 1990s.
While the risks varied across the globe, no region would escape the fallout completely.
"As a consequence, trade conditions are expected to deteriorate further as a real drop-off in demand hits order books and bankruptcies and late payments rise," D&B corporate affairs director Damian Karmelich said.
Measures taken by authorities in G7 nations to support their financial sectors meant the risk of renewed widespread financial instability in developed economies was receding.
However, growth in developing countries, many of which were key trading partners for New Zealand, would slow sharply this year, he said.
New Zealand had its rating downgraded by D&B in October because of increased macroeconomic uncertainty.
Economic growth in emerging markets was being constrained by falling demand for emerging market exports, substantial falls in export prices and a drop in trade finance.
Also, the reassessment of global risks and the reduction in international liquidity would reduce funding and, consequently, default risk in emerging markets would increase, Mr Karmelich said.
With trade opportunities reducing short-term growth, emerging economies might be tempted to adopt more restrictive policies towards good and services imports and capital outflows.
"The tightening of trade finance and the expected slowdown in emerging markets has significant implications for New Zealand traders and the economy.
"Demand from Asia is critical to New Zealand's economic prosperity."
New Zealand's exporters would be hit hard this year.
Small and medium-sized enterprises (SMEs), in particular, would face difficulties managing costs as trade finance became more expensive and prices for goods dropped, he said.
In New Zealand, the economic climate remained pessimistic due to several negative elements.
Consumers were highly indebted, house prices continued to decline and the export and tourism sectors were expected to experience increasingly negative conditions in the months ahead.
The New Zealand dollar had fallen 35% against the United States currency since its peak in March, with the depreciation exacerbated by the latest phase of the global financial crisis.
Capital had left the country as risk-averse investors shed New Zealand assets in favour of Japanese and American currencies, Mr Karmelich said.
While exporters might, in time, benefit from the weaker currency, importers' payments performance could suffer this year.
"New Zealand businesses faced a tough global and local climate during the back-half of 2008 and further challenges lie ahead in 2009," Mr Karmelich said.
