AUS
NZ
UK
CA
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IND
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Summary
- Last quarter GDP of New Zealand declines by 1%.
- Even though GDP picked up in September, total annual drop has been 2.9%.
- Economists had expected GDP to improve in Q4 also as there was an uptake in the business activity.
The GDP of New Zealand shrank by 1.0% in the last quarter of 2020, making the total annual drop in GDP to 2.9% for 2020. This was New Zealand’s largest GDP decline so far, according to the data released by StatsNZ.
Even though the economists had forecast a slight uptake in the GDP in Q4, the decline came as a surprise as the economy was on the path to recovery in the last quarter.
Reasons for the contraction
The reasons for the contraction are not difficult to identify. Due to COVID-19 restrictions, several industries showed a decline in their business. In fact, according to StatsNZ, 7 out of 16 industries dropped in terms of revenues. Two industries that dropped significantly in Q4, reflecting on the GDP, were the construction and the retail trade. It may be noted that both these industries had shown a good result in the September quarter. Fall in the construction of commercial buildings and infrastructure led the fall even though the housing construction activity was high.
Retail trade and accommodation industries were impacted by the absence of international tourists.
Even the hospitality industry, which has hotels, restaurants, and cafes, saw low business in the whole of CY2020 as compared to 2019. However, the two industries that held up the GDP were the transport and the warehousing. These industries operated at almost pre-COVID-19 levels.
Previous quarter
This fall in GDP came after the September 2020 quarter showed a rise of 14%. However, this rise did not make up for the economic impact of COVID-19 and the steps taken to contain it in the previous quarters had showed a marked decline in the GDP numbers.
In September, the service industries rose by 11.1% and that became the main contributor to the GDP numbers. All 11 out of 11 industries reflected an uptrend in the September quarter. However, on an annual basis, service industry declined by 1.4%, with six out of 11 industries showing a decline.
This industry has been directly affected by the ongoing border closures and the reduction in international travel, as well as the fall in domestic travel during Alert Level 4 restrictions in the June 2020 quarter.
So, the expectation is that the economy is going to remain uncertain till the borders remain closed.
Some economists feel that despite the economic recovery, due to certain headwinds, uncertainty will linger for more time.
