New Zealand's quarterly growth contracted for the first time in over nine years, according to a Reuters poll, and there's more pain coming as the real impact of the lockdown enforced to contain the coronavirus may only be seen in the coming months.
The median forecast of economists polled by Reuters showed growth at -1.0% quarter-on-quarter in the three months to March, contracting for the first time since December 2010, while annual growth was at 0.3%.
New Zealand is among a handful of countries that has emerged out of the coronavirus pandemic, largely due to its strict lockdown that forced almost everyone to stay at home and businesses to shut.
All restrictions, except border controls, were lifted last week.
ANZ Bank revised its GDP forecast upwards due to the fast recovery from the coronavirus outbreak, but still sees a 1.3% quarter on quarter contraction, and significant weakness in the coming quarters.
"Eliminating COVID-19 so quickly was a best case scenario, but the best of a pretty bad bunch," ANZ's Senior Economist Liz Kendall said in a note.
ANZ expects GDP to contract 20%-21% over H1, and says the Reserve Bank of New Zealand (RBNZ) has to stay the course with its NZ$60 billion ($39 billion) quantitative easing (QE) programme to stimulate the economy.
"Markets might be buoyed for a while, but a reality check will come. It will be a slow recovery and the RBNZ needs to stay the course with QE," Kendall said.
RBNZ is expected to hold at its meeting on June 24 after re-affirming that the cash rate will remain at 0.25% until early 2021.
Westpac said the impact of the lockdown on the first quarter will be hard to assess, which is why forecasts have varied widely with the treasury assuming a 0.7% decline, while RBNZ projecting a 2.4% drop.
The Reuters poll sees current account deficit narrowing to 2.7% of GDP from 3% previously.
(Reporting by Praveen Menon; Editing by Stephen Coates)
