Thursday's 0.2 percent fall in Gross Domestic Product (GDP) doesn't put New Zealand in a recession yet, but experts predict it could be around the corner.
Given Russia's invasion of Ukraine and the economic fallout from COVID-19, some economists say a recession is inevitable. Businesses throughout New Zealand are struggling with critical staff shortages, record employment and huge demand for goods and services.
But other analysts believe New Zealand would dodge a recession as the country's activity rebounds from COVID-19 lockdowns.
So what does New Zealand's declining GDP mean for the average Kiwi? And how close are we to a recession?
Here's all the reaction and explanation.
What is a recession?
A recession is when there are two successive quarters of negative growth, meaning another decline in GDP over the June quarter would put New Zealand officially in recession.
During the severe economic downturn in 2008-2009, commonly known as the Global Financial Crisis (GFC), New Zealand's GDP contracted for six quarters in a row.
Infometrics senior economist Brad Olsen described the economic hit from the GFC as being far worse than the current situation.
"We are going to bounce around because we simply don't have the people, we don't have the resources to grow all that much more," he told AM Early this month.
"That could lead to a technical recession but it's certainly not 2008/09 again - we are not back into the GFC, we are not in a great depression 2.0 but we are really struggling to grow."
Why did NZ's GDP decline in the March quarter?
Covering the period of January 1 to March 31, March 2022's quarterly GDP result was measured during the peak of the COVID-19 Omicron outbreak.
ASB economist Nathan Keall said the Omicron outbreak contributed to household spending and worker absentee implications.
"There were signs this quarter that the service sector took a substantial hit from the Omicron outbreak, with retail trade falling 1.9 percent - a fair bit weaker than indicators had suggested. But with the sector facing broader headwinds, thanks to the hit household balance sheets are taking from higher interest rates and rising inflation, the challenge for forecasters is working out how much of that dip is temporary and how much is likely to be sustained."
On the positive side, New Zealand's annual average GDP, reflecting the four quarters to March 2022 compared to the four quarters to March last year, rose 5.1 percent.
How does New Zealand's GDP compare globally?
To put New Zealand's GDP fall into context, Australia's economy grew 0.2 percent in the March 2022 quarter. The UK's GDP grew 0.8 percent in the same quarter, although that coincided with Britain scrapping all COVID-19 restrictions.
However, Keall said quarter-to-quarter swings shouldn't be stressed about too much.
On a month-by-month basis, the UK's GDP shrunk 0.3 percent between March and April, its latest official figures show.
"GDP prints over the past two years have been ultra-volatile and heavily impacted by periodic shifts in alert levels or peaks and troughs in COVID cases," Keall said.
What do our politicians say?
New Zealand's declining GDP was a result of the Government's "spending and money printing", the Opposition has said.
ACT Party leader David Seymour has again attacked the Government's "spending and money printing" which he said were contributing to rising costs.
"Today's GDP numbers show that New Zealand is halfway down the road to recession," he said.
"Kiwis are paying more for almost everything, whether it's at the pump or the checkout. Prices are rising because the Government has shut down production and compensated with a flood of borrowed and printed cash.
"It's why families have been hit harder by the cost of living crisis. It means there's less money to put away for retirement."
Russia's invasion of Ukraine and the economic fallout from COVID-19 were contributing to the GDP decline, but Seymour said Prime Minister Jacinda Ardern's "unworkable regulations are pushing us towards recession".
"The Prime Minister is going to great lengths to say it's all global headwinds but that's just spin.
"Australia's economy grew in the same period, by 0.8 percent, an annualised 4 percent better than New Zealand."
He said a shift was needed.
"The question Kiwis must be asking themselves is, 'Do we want to carry on in comfortable decline until we slip away from first-world status? Or do we want real change?'"
National Party finance spokesperson Nicola Willis said New Zealanders were going more and more backward each week.
"The economic picture was already dark with record-high inflation, rapidly rising interest rates and wages falling behind and today's figures prove the toll that is taking across the country," she said on Thursday. "The Government must front up to the reality of New Zealand's economic situation, set out a plan to address inflation and drive productivity growth."
Willis said New Zealanders would be hit harder in the coming months.
"The risks for families and businesses are serious," she said.
Finance Minister Grant Robertson said the Government had eased COVID-enforced border restrictions to help businesses and the economy rebuild.
"While the domestic economy is resilient and the annual GDP figure is strong, we know many New Zealanders are struggling with higher prices," he said. "This is why we have reduced fuel excise duty, road user charges and halved public transport fares, as well as introducing a temporary, targeted cost of living payment."
Last month, the Government introduced a one-off $350 payment for about 2.1 million New Zealanders who earn less than $70,000 per year - aimed at cushioning the blow of the cost of living crisis.
Before then, Robertson said the Government had also increased benefits and lifted the minimum wage.
"Unemployment is at a record low and we are in a strong fiscal position," he said. "The easing of border restrictions and opening up to skilled workers and tourists will help business and the economy rebuild.
"Exports are still 1.9 percent up on a year ago, so the March quarter fall shows just how volatile the global situation is."
Robertson said the Government aimed to continue "controlling" spending.
"We are keeping debt in check and making important investments in our future to deliver a high wage, low emissions economy that provides greater security in good times and bad."