New Zealand fell into its deepest economic recession on record in the second quarter, due to the Covid-19 pandemic. Overall GDP declined by 12.2% within three months (April – June). This is New Zealand’s first recession since the global financial crisis hit in 2007.
The impact of this recession has been disastrous for certain sectors of the economy, with the country’s border remaining closed to foreigners since March. As Stats NZ spokesman Paul Pascoe said, “Industries like retail, accommodation and restaurants, and transport saw significant declines in production because they were most directly affected by the international travel ban and strict nationwide lockdown; as did construction and manufacturing at 25.8% and 13% respectively. Household domestic spending dropped by 12%.”
He added, “Other industries, like food and beverage manufacturing, were essential services and fell much less.” Moreover, exports fell by 16% since the first quarter; imports declined by 25% due largely to a reduction in tourists; and GDP per capita dropped by 12.6%.
The Covid-19 elimination strategy in context
New Zealand sought to eliminate Covid-19 within its borders by implementing one of the strictest lockdowns in the world, in hopes of a faster economic recovery after containing the virus. The first country-wide lockdown lasted seven weeks, from the final week of March to the end of May; the second lockdown took place in Auckland during mid-August to get the virus under control.
Despite the severe lockdown and August setback, New Zealand remains in a better economic situation than many countries that have yet to bring the virus under control. The latter group includes the US and UK, whose GDP plummeted 32.9% and 21.7% respectively from a year earlier.