Covid pushes New Zealand into worst recession in years

New Zealand is in its deepest recession in decades, following strict measures in response to the Covid-19 pandemic that were widely praised.

The country’s GDP contracted 12.2% between April and June as the blockade and border closures hit.

It is New Zealand’s first recession since the global financial crisis and the worst since 1987, when the current measurement system began.

But the government hopes its response to the pandemic will lead to a speedy recovery.

The nation of nearly five million was briefly declared virus-free and while it still has a handful of cases, it has only had 25 deaths.

The economy is likely to be a key issue in next month’s elections, which were delayed after an unexpected spike in Covid-19 cases in August.

Stats NZ spokesman Paul Pascoe said that the measures implemented since March 19 have had a major impact on some sectors of the economy.

“Industries such as retail, lodging and restaurants, and transportation experienced significant drops in production because they were the most directly affected by the international travel ban and the strict national lockdown,” he said.

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The government of Prime Minister Jacinda Ardern has said that success in suppressing the virus is likely to help prospects for recovery.

Finance Minister Grant Robertson said GDP figures were better than expected and suggested a strong recovery in the future.

“Going hard and early means we can come back faster and stronger,” he said.

Some economists also predict a quick recovery, due to New Zealand’s strong response to the virus.

“We expect the record drop in GDP for the June quarter to be followed by a record rise in the September quarter,” said Westpac senior economist Michael Gordon.

Ardern said it supports the economy’s resilience.

“I think one of the key questions here is not just about what happened during that June quarter in terms of the effect of the lockdown. It is actually about the rally, and I support the rally in New Zealand,” he said.

Ms Ardern said that activity is already picking up, as the country has been able to open up much faster compared to other nations.

“Even with some of the most recent restrictions, we have seen a return to activity, while compared to Australia we are in a much better position,” he added.

However, Treasury forecasts released yesterday suggested massive debt and continued disruptions are likely to delay a full recovery.

The opposition National Party accused the government of a lack of pragmatism that made the impact worse than necessary.

New Zealand saw a steeper decline than neighboring Australia, where the lockdown was less severe.

But the state of Victoria has faced a second lockdown, which is likely to affect Australia’s economic recovery.