New Zealand GDP takes biggest slide in 29 years due to COVID-19

New Zealand officially entered a recession for the first time in 10 years after Gross Domestic Product (GDP) shrank by 1.6 percent in the first quarter of the financial year. Stats New Zealand on June 18 said that the contraction in the GDP is the largest in 29 years and blamed it on the coronavirus restrictions that impacted economic activity in the country. According to the report, service industries contributed the most in the contraction, making it almost half of the overall drop in the GDP. 

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"The 1.6 percent fall surpassed quarterly falls during the global financial crisis in the late 2000s. It is the largest quarterly fall since the 2.4 percent decline in the March 1991 quarter. Industries related to international travel, such as accommodation and transport, began to feel the effects of COVID-19 earlier in the quarter, with activity dropping significantly once the borders closed on 19 March,” national accounts senior manager Paul Pascoe said.

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Most affected industries

The hospitality industry (accommodation, restaurants, and bars) was among the most affected industries, falling 7.8 per cent, as tourism fell after the border was closed to slow the spread of COVID-19. The construction industry and the warehousing industry recorded 4.1 per cent and 5.2 per cent fall respectively. The Stats New Zealand report said that parts of the transport industry, particularly air transport, which recorded a drop due to restrictions on both domestic and international travel.

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Annual GDP growth for the year ended March 2020 dropped to 1.5 per cent, compared with a 3.1 per cent growth in the year ended March 2019. Annual growth in GDP has been generally slowing since December 2016 when it was 3.9 per cent. As New Zealand recorded a 1.6 per cent decline in economic activity, in the same period, there was a 2.1 per cent decline in Canada, a 0.3 per cent fall in Australia, a 0.6 per cent decline in Japan, a 2.0 per cent decline in the United Kingdom, and a 1.3 per cent decline in the United States, the Stats NZ said.

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