WELLINGTON, New Zealand–New Zealand’s economy shrank in the last quarter of 2020 as a border closure to help contain the pandemic deprived businesses of a summer influx of foreign tourists, offsetting a housing boom sparked by record low interest rates.
Statistics New Zealand said gross domestic product dropped 1.0% from third quarter. The outcome was worse than expected, but expectations had varied widely following a record contraction in the second quarter and a frenetic bounce back in the third quarter.
The impact of the pandemic was more apparent in annual figures, with the economy 2.9% smaller in 2020 than it was in 2019.
The figures underlined that continued fiscal and monetary support for the economy is needed.
New Zealand has largely contained the spread of Covid-19 through a combination of strict lockdowns and a border closure. The country of five million has started its vaccination effort, which is expected to continue throughout 2021 alongside deliveries of the Pfizer-BioNTech vaccine.
New Zealand’s first lockdown last year from late March to May, which kept people at home and shuttered most businesses, resulted in an 11.0% contraction in the economy in the second quarter. It was followed by a 14% expansion in the third quarter as pent-up demand was released.
The economic and fiscal costs of the pandemic measures have been less severe than initially feared, but are still significant. Analysts say they will be a burden in the future as the constraints of higher government and household debt are felt.
Statistics New Zealand said the largest contributors to the drop in the fourth quarter’s GDP were construction, retailing and accommodation.
Commercial building and infrastructure declined following their snapback in the third quarter, while residential building continued to grow, the agency said. Retailing and accommodation were hurt by the loss of international tourists, it said.
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