(Bloomberg) — New Zealand suffered its worst economic slump since the Great Depression in the second quarter as a strict nationwide lockdown to combat the coronavirus brought the country to a standstill.

Gross domestic product plunged 12.2% from the first quarter, Statistics New Zealand said Thursday in Wellington. That’s the biggest three-month contraction since quarterly records began in 1977. Economists forecast a 12.5% decline. From a year earlier, the economy shrank 12.4%, the most recorded in comparable official data dating back to 1955.

New Zealand is going through a sharper but shorter economic shock than it experienced during the depression, when GDP fell 5.3% in 1931 and a further 7.1% in 1932, according to academic research. Nor is the Covid slump as bad as initially feared. The South Pacific nation initially succeeded in eliminating community spread of the virus, allowing it to emerge early from lockdown, and indicators suggest growth surged in the third quarter as consumers went on a spending spree.

However, the real pain may still lie ahead. The border remains closed to foreigners, crippling the tourism industry, and the end of the government’s wage subsidy is expected to see unemployment rise.

“The lockdown-induced contraction in the second quarter is only the first round of this economic shock,” said Miles Workman, senior economist at ANZ Bank in Wellington. “We’re yet to really feel the full impact of the closed border and the sharp global contraction. Fiscal and monetary policy still has its work cut out.”

The New Zealand dollar moved lower after the release. It bought 67.21 U.S. cents at noon in Wellington, down 0.2%.

Today’s report confirms the first recession — defined as two consecutive quarters of economic decline — since 2010. GDP fell a revised 1.4% in the first quarter of the year, the statistics agency said.

The data are unlikely to dent Prime Minister Jacinda Ardern’s chances of winning a second term in the Oct. 17 election. Ardern is riding high in the polls after her deft handling of the pandemic.

Elimination Strategy

The government’s pursuit of an elimination strategy saw it impose one of the strictest lockdowns in the world but allowed a quicker resumption of economic activity once the virus was contained. New Zealand has recorded 1,451 confirmed cases of Covid-19 and just 25 deaths.

The nation’s seven-week lockdown began in the final week of March and ended in May. While a fresh community outbreak in mid-August required a second lockdown in largest city Auckland, the country has fared better than many of its peers who still don’t have the virus under control.

U.K. GDP plummeted 20.4% in the second quarter from the first and 21.7% from a year earlier. In the U.S., the economy shrank 9.5% in the quarter, a drop that equals an annualized pace of 32.9%, its sharpest downturn since at least the 1940s.

Australia’s economy shrank less — 7% in the quarter and 6.3% in the year — but it is not expected to enjoy the same bounce back in activity in the third quarter that New Zealand is experiencing.

The government has pledged NZ$62 billion ($42 billion) of fiscal support to help revive domestic demand and protect jobs, while the central bank has slashed interest rates and embarked on quantitative easing to drive down borrowing costs. Reserve Bank policy makers are considering taking interest rates negative to further nurse the economy through the downturn.

The second-quarter contraction was driven by service industries, particularly hospitality and accommodation as international travel stopped, the statistics agency said.

Other Details:

Manufacturing output fell 13% from the first quarter and construction slumped 26%Household consumption fell 12%, led by durable goods and travel spendingExports fell 16%, led by a decline in tourist spendingImports slumped 25%GDP per capita declined 12.6%

(Updates with economist’s comment in fifth paragraph)

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