WELLINGTON- New Zealand’s economy shrank 1.6 percent in the March quarter, the largest drop in 29 years and the first quarterly fall since the December 2010, as the initial effects of coronavirus curbs paralyzed activity.
The contraction was worse than economist forecasts for a 1.0 percent fall but smaller than the central bank’s projection for a 2.4 percent drop.
The decline is expected to have deepened in the current quarter due to the tighter restrictions seen in April and May, Finance Minister Grant Robertson said.
That would put New Zealand in its first technical recession, defined as two straight quarters of contraction, since 2010, although a recent easing in curbs is expected to aid a recovery in the second half.
“Now, our focus is on protecting jobs and supporting the economy to recover and rebuild through the investments made in Budget 2020 and by the COVID Response and Recovery Fund,” Robertson said. “By opening up the economy quicker than forecast, we’ve got a head start on our recovery.”
The 1.6 percent decline was the largest quarterly fall since the March quarter of 1991.
Annual production-based GDP fell 0.2 percent compared to a 0.3 percent rise forecast in the Reuters poll.
Economists have warned the data may not fully capture the extent of the economic impact of lockdowns designed to limit the spread of the coronavirus, which were only enforced toward the end of the first quarter.
“We are currently seeing a post-lockdown bounce in activity but the longer-lasting recessionary effects of this crisis will be determined by where the trend settles after that,” ANZ Senior Economist Liz Kendall said.