A Government report is warning that the Cook Islands economy may be stung by the forecast recession in New Zealand.

The Half Year Economic and Fiscal Update (HYEFU), released to Cook Islands News a week ago, paints an optimistic picture overall, with growth projected to be 11.8 per cent for the remainder of the 2022-23 financial year, and 6.8 per cent for the following year.

However, the HYEFU also notes that “in response to inflation, the Reserve Bank of New Zealand (RBNZ) has acted aggressively and is now predicting a short recession which may impact on visitors to the Cook Islands”.

Businessman Fletcher Melvin, of Island Craft, said this forecast was “actually quite positive”.

“The RBNZ had previously predicted a hard recession, so it sounds like we should be able to make our way out of it,” Melvin said.

“We need to maximise the tourists that we have.”

Melvin said it was important that businesses built up cash reserves during this period.

“But there are lots of positive aspects on the horizon, the supply chain is opening up, and is expected to return back to normal settings early (this) year,” he said.

“Recessions are largely driven by business and consumer confidence, so businesses need to carry on with their forward planning.”

Cook Islands Chamber of Commerce chief executive Rebecca Tavioni said businesses needed to focus on what they can control, rather than what they can’t.

“Our operators will be likely feeling the pinch at the margins, but we can control the way we operate. It’s about not pricing yourself out of the market,” Tavioni said.

“The lessons we learned during the challenges of Covid-19 should prepare us for the coming challenges.”

Tavioni said some businesses were already focusing on the local market during the downtime, offering special deals and “staycations”.

“The competition isn’t each other in the Cook Islands, it’s Fiji, Australia and Bali. We need to remain appealing for the price-conscious traveller,” she said.

“New Zealanders and Australians still want to travel and get some rest and relaxation. The challenge will be ensuring they come here for that.”

Tavioni said from a chamber perspective, this year’s Budget would be interesting.

“We’re keen to see what it looks like and how optimistic it might or might not be,” she said.

Robert Skews, of Island Hopper, said a recession in New Zealand would affect “the lower end of the market” to a greater degree.

“I guess the concern is that until the flights from Sydney and Hawaii come online, we’ve got all our eggs in one basket,” Skews said.

“It’s the high airfare prices that have been the killer, but there are indications that these are going to come down.”

Skews said he would be surprised if it returned to pre-Covid-19 levels, where the island recorded more than 180,000 visitors in a year.

“Then again, the question is whether we want it that busy, as there were big pressures on the environment and infrastructure,” he said.

Skews said many businesses would struggle up until March, but he was optimistic that things should right themselves in April and beyond.

From May 20, Hawaiian Airlines will launch a Rarotonga to Honolulu flight, while Jetstar’s flights between Sydney and Rarotonga will resume from June 29, 2023.

“That will broaden our customer base,” Skews said.

Cook Islands Tourism Industry Council president Liana Scott, of Muri Beach Club Hotel, said there might be an upside to the recession.

“I think any recession in New Zealand will actually improve travel to the Cook Islands,” Scott said.

“I would suggest that the long-haul market gets affected more than the short, but this is just my opinion.”