New Zealand Economy shrinks, enters recession.
New Zealand Economy shrinks, enters recession: New Zealand is now in a recession as official data shows the economy has contracted over two consecutive quarters.
On Thursday, Stats NZ released its gross domestic product (GDP) data for the first quarter of this year and the direction had not changed since December.
At the end of last year, GDP was down 0.7 per cent in New Zealand.
After Europe, New Zealand Economy shrinks, enters recession. GDP falls for two consecutive quarters Their central bank raises interest rates, inflation at all time high.
New Zealand Economy shrinks 0.1% in the first quarter of this year.
It decreased by 0.1% in the first quarter of this year.
Although the number is minor, other signs suggest that New Zealand is likely currently experiencing an extended period of economic decline that will last longer than six months.
The last time the nation experienced two consecutive quarters of negative growth, which is the official definition of a recession, its international borders were shut, and the COVID-19 epidemic had just begun to spread over the globe.
The difference between now and then is that many households cannot afford to, whereas back then New Zealanders were cooped up in their homes and unable to spend money.
“New Zealand’s economy is in the midst of a necessary, policy-induced slowdown following the strong post-pandemic recovery,” the International Monetary Fund said in a statement this week.
“New Zealand is likely to continue slowing in the near term as monetary tightening takes hold.”
Both the New Zealand and Australian economies benefited from strong government stimulus during the early stages of the pandemic.
New Zealand economy dips into recession as higher interest rates bite
The IMF said “this came at the cost of overheating” in New Zealand.
Gareth Kiernan from economic research group Infometrics wrote that he expected New Zealand’s GDP growth would average “less than 0.2 per cent per quarter between the end of 2022 and mid-2024”.
New Zealand Economy shrinks, enters recession: The recession in New Zealand’s economy is a result of interest rates that have risen to a 14-year high. The economy is presently in a “technical recession” as a result of the GDP’s 0.1% decline in the first three months of 2023 and the 0.7% decline in the previous quarter.
In October 2021, the Reserve Bank of New Zealand (RBNZ) substantially raised borrowing costs. One of the first nations to begin raising interest rates after the pandemic was New Zealand, which has even surpassed the US Federal Reserve. The bank raised the benchmark interest rates to 5% last month.
The effects of high interest rates, which result in higher mortgage repayments and higher loan expenses for New Zealanders who were already struggling with rising prices, are now being felt.
The RBNZ had before hinted that it had no future plans to raise interest rates. The decrease strengthens predictions that the central bank won’t boost interest rates again anytime soon.
The teachers’ strike, Cyclones Hal and Gabrielle, and other factors all had an effect on New Zealand’s economy during the first three months of the year. The Russia-Ukraine war increased prices for everything, including food and petrol, due to inflation.
“The adverse weather events caused by the cyclones contributed to falls in horticulture and transport support services, as well as disrupted education services,” Jason Attewell, economic and environmental insights general manager at Statistics New Zealand, said in a statement.
Business services suffered the most, falling by 3.5%, followed by postal, warehousing, and transportation, which fell by 2.2%. On the other side, media and telecoms saw a 2.7% increase.
Although the recession is still technically ongoing despite two consecutive quarters of decline, it has taken on enormous political significance as New Zealand prepares for its October election and citizens grapple with rising living expenses.
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