New Zealand’s economy bounced back strongly from recession in the third quarter, achieving a so-called V-shaped recovery as massive fiscal and monetary stimulus fueled consumer spending.
Gross domestic product surged 14% from the second quarter, when it contracted a revised 11%, Statistics New Zealand said Thursday in Wellington. Economists forecast a 12.9% gain. From a year earlier, the economy grew 0.4%, confounding the consensus forecast for a 1.8% decline.
New Zealanders have gone on a spending spree since the nation eliminated community transmission of Covid-19 in May and then successfully contained sporadic outbreaks. However, the border remains closed to foreigners, crippling the tourism industry, and many businesses have put investment and hiring plans on hold, which is projected to push the jobless rate higher in 2021.
The V-shaped economic rebound is “vindication of the Covid-19 ‘elimination’ strategy New Zealand has pursued, as it has underpinned a strong economic recovery from what has been an unprecedented shock,” said Paul Bloxham, chief Australia and New Zealand economist at HSBC in Sydney. Still, “closed international borders to people movement are weighing on tourism and other services exports, and are set to continue to do so for some time.”
The New Zealand dollar rose after the GDP report and bought 71.29 U.S. cents at 3:52 p.m. in Wellington. The currency has gained 5.5% the past three months, and was appreciating ahead of the release after Prime Minister Jacinda Ardern announced plans to offer Covid-19 vaccines to the entire population in the second half of 2021.
The economy’s quick rebound to pre-Covid levels was a rare feat, said Stephen Toplis, head of research at Bank of New Zealand in Wellington.
“We can only identify three other countries that have achieved the ‘full recovery’: Taiwan, China and Ireland,” he said. “New Zealand is definitely in a very small minority.”
The government’s determination to eliminate the virus saw it impose one of the strictest lockdowns in the world but allowed a quicker resumption of economic activity once it was stamped out. New Zealand has recorded 1,744 confirmed cases of Covid-19 and just 25 deaths.
A fresh community outbreak in mid-August required a second, six-week lockdown in largest city Auckland, but the country has fared better than many of its peers. U.K. GDP fell 9.6% in the third quarter from a year earlier, while Australia’s fell 3.8%.
The government pledged NZ$62 billion ($44 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 and term lending programs to further drive down borrowing costs.
That’s put a rocket under the housing market, with prices soaring to fresh records.
Still, the Reserve Bank and some economists have cautioned the economy may contract in the fourth quarter and even face a double-dip recession early next year, citing slower global growth and the possibility that the border will remain closed to most visitors until at least the second half of 2021.
The third-quarter expansion was driven by construction and services industries — in particular retailing, accommodation and restaurants, the statistics agency said.