New Zealand fell into its deepest economic slump on record in the second quarter as its battle against the coronavirus pandemic paralysed business activity, official data showed on Thursday.
Gross domestic product contracted a seasonally adjusted 12.2 per cent quarter-on-quarter, its sharpest quarterly contraction on record and largely in line with forecasts of a 12.8 per cent decline from economists polled by Reuters. GDP fell 12.4 per cent year-on-year.
The Reserve Bank of New Zealand had forecast a quarterly and annual GDP decline of 14 per cent in its August statement.
Growth has been hit by a standstill in economic activity as a strict nationwide coronavirus lockdown in April and parts of May forced almost everyone to stay at home and businesses to shut.
The GDP data confirms New Zealand’s worst recession, defined as two straight quarters of contraction, since 2010, with GDP in the March quarter falling 1.6 per cent.
In comparison, second quarter economic growth in neighbouring Australia which enforced a less stringent Covid-19 lockdown fell 7.0 per cent, while the United States recorded a 9.1 per cent drop.
But economists say New Zealand will bounce back faster, while other nations are still struggling to contain the coronavirus.
"We expect the June quarter's record-breaking GDP decline to be followed by a record-breaking rise in the September quarter," said Westpac Senior Economist Michael Gordon.
Prime minister Jacinda Ardern’s government, which faces an election on October 17th, has said success in suppressing the virus locally is likely to help recovery prospects.
Treasury forecasts released on Wednesday showed that while New Zealand’s response to Covid-19 helped lessen the short-term economic shock, massive debt and continuing disruptions will delay a full recovery.
Economists say the GDP data will have little impact on the central bank’s policy, which is expected to hold interest rates at a record low of 0.25 per cent at its meeting on September 23rd. - Reuters