Coronavirus: New Zealand records biggest GDP quarterly fall in 29 years - top Kiwi economist

New Zealand has recorded its biggest GDP quarterly fall in 29 years, a leading Kiwi economist has revealed - and he warns the coronavirus crisis will likely cause it to fall again.

Dr Murat Ungor, an economics lecturer at Otago University, analysed data from the Organisation for Economic Co-operation and Development's (OECD's) quarterly national accounts in efforts to understand the scale of COVID-19's impact on the global economy.

His analysis found that New Zealand had recorded its biggest quarterly drop in GDP since 1991 in the first quarter of 2020, contracting by 1.6 percent. In the first quarter of March 1991, our GDP contracted by 2.4 percent.

The drop also marks the first time New Zealand has recorded negative quarterly growth of any kind since 2010, when our GDP contracted by 0.5 percent.

Quarter-on-quarter growth rates of GDP.
Quarter-on-quarter growth rates of GDP. Photo credit: OECD

GDP, or gross domestic product, is the monetary value of the goods and services a particular country produces. A drop can foreshadow a rise in unemployment, decreased spending and even recession.

While it takes at least two consecutive quarters of negative growth for a country to enter a recession, Dr Ungor warns that's exactly what we're on course for.

"It is very likely New Zealand will record another negative growth in the June quarter of 2020," he said.

"If this occurs, two consecutive quarters of 2020 will have negative growth rates for the country, and the last time New Zealand recorded two consecutive negative quarters for GDP was the third and fourth quarters of 2010."

But it could be worse. Dr Ungor says China has recorded "a historic slump", with OECD data showing its GDP fell a massive 9.8 percent in March.

Meanwhile the likes of Australia has stayed reasonably strong, with its GDP dropping 0.3 percent, while Japan fell by 0.6 percent, and the US by 1.3 percent.

"While China's GDP plunged further during the first quarter of 2020 than during the 2009 global financial crisis, the situation is the reverse for Australia, Japan, New Zealand, and the United States," Dr Ungor says.

The global economy is anticipated to shrink by 4.9 percent in 2020, according to the June edition of the International Monetary Fund's World Economic Outlook Update.

On Tuesday Infometrics senior economist Brad Olsen said New Zealand could be cautiously optimistic, but said our economic outlook remained "finely balanced".

"We are going to see more job losses. We're not out of the woods yet," he told The Project. "Once the actual economic realities start to hit, I think a lot of Kiwis are going to realise there's still a lot of strife out there moving forward."

Meanwhile economist Cameron Bagrie says the end of the Government's wage subsidy scheme may be make or break for small and medium enterprises (SMEs).

"The bottom line is that a lot of small businesses have been pretty critically reliant on it," he told The AM Show on Tuesday.

"The Government doesn't have a bottomless pit of money, so at some stage small businesses are going to have to stand on their own two feet… The tourism sector has been on that life support but it is going to have to stand on its own two feet at some stage."

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