New Zealand Institute of Economic Research principal economist Shamubeel Eaqub warns that mortgage rates may rise as New Zealand feels the effects of mounting debt crises in major world economies.
After a week in which 5% was wiped off markets around the world, Wall Street stocks closed in positive territory on Friday. New Zealand shares on Friday closed down 0.9%.
Mr Eaqub says a slowdown in the global economy will hurt New Zealand, particularly the tourism, manufacturing and export sectors.
"We're a small open economy and if the global economy is slowing we will be affected. We're not even sure if the global economy is heading into recession yet, and if it does, I'd be surprised if we came out unscathed."
He says there is also a risk the cost of borrowing will rise for New Zealand banks, leading to increases in mortgage rates.
The New Zealand dollar fell heavily on Thursday. At 10.45am on Saturday, it was trading at 77.66 US cents.
IMF calls for united action
International Monetary Fund managing director Christine Lagarde has called for the world's leading countries to act now and work together to ensure economic recovery.
Speaking at the annual meetings of the IMF and the World Bank in Washington she said there was a path to recovery, albeit narrower than three years ago.
She said with "dark clouds over Europe" and huge uncertainty in the US,
''we are all in it together and nobody should be under any illusion that there could be a de-coupling.''
Global finance chiefs have turned up the heat on Europe to do more to prevent Greece's debt woes from infecting other euro zone countries and the world economy.
Concern now appears to be turning towards safeguarding the banking system more than rescuing Greece.
Meanwhile British Chancellor George Osborne has warned time is running out to tackle the eurozone debt crisis.
Speaking in Washington, where the G20 is also gathering, Mr Osborne saidBritish finance minister George Osborne said European leaders had six weeks to end the crisis.
needed to gain control of the situation by the time leaders of the Group of 20 economies meet in France in November.
World stock markets, which had plunged to a 14-month low on fears about the scale of the crisis, steadied after European Central Bank officials said they would use more firepower to help the banking system withstand financial strains.
