(ATF) New Zealand’s economy contracted in the final three months of 2020 after its dramatic recovery from a coronavirus pandemic-induced recession.
Fourth-quarter gross domestic product (GDP) fell 1% from the third quarter, when it expanded a revised 13.9%, Statistics New Zealand said on March 18.
The decline in economic activity was worse than predicted by any of the five major banks, three of which had been forecasting a modest lift of between 0.1 and 0.5 per cent for the quarter.
From a year earlier, the economy shrank 0.9% against expectations of 0.5% growth.
Fiscal and monetary stimulus lifted confidence in the second half, further buoyed by the nation’s ability to contain sporadic community outbreaks of Covid-19.
“The solid decline in activity in the fourth quarter means that a second recession is imminent as GDP is bound to decline in the first quarter of 2021,” Ben Udy, an Australia and New Zealand economist at Capital Economics, said.
He forecast a solid 5% rise in GDP during 2021 with the economy buoyed by the rollout of vaccines and less risks of snap Covid-19 lockdowns.
The border remains closed to foreigners, crippling the tourism industry during the vital summer months, and many businesses have put investment and hiring plans on hold.
However, New Zealand and Australia are close to agreeing to terms for a quarantine-free travel corridor, Deputy Prime Minister Grant Robertson said on Thursday March 18.
“There’s a few issues still to talk through, including what we do in the event that there is an outbreak [and] how we manage people who aren’t in their home country at that time,” Robertson told Radio New Zealand.
With reporting by Reuters