20 Jan 2010

Growth, mergers predicted to rise

3:05 pm on 20 January 2010

A major bank is predicting economic growth of 3.7% this year, while KPMG expects merger and acquisition activity to return to 2008 levels.

Westpac believes the economic growth will rise as New Zealand benefits from rapidly recovering emerging economies.

Dominic Stephens, an economist at Westpac, says stronger-than-expected economic data may force the Reserve Bank to raise interest rates sooner than expected.

Merger and acquisition activity, which halved from its 2007 peak during the financial crisis, is also predicted to bounce back.

Tony McNaught, a corporate finance partner KPMG, says buyers are now returning to the market as debt levels have fallen, which makes companies more affordable. He says earning forecasts are more reliable in an improving economy, making firms more attractive targets.

KPMG expects merger and acquisition activity to return to 2008 levels.

In a more downbeat assessment, the International Monetary Fund says while China and Asian economies are leading the recovery, the global economy could experience another downturn - a "double-dip" recession.

The body says countries should not wind down their stimulus packages, which are being used to prop up growth.