New Zealand enters technical recession – UOB

Economist at UOB Group Lee Sue Ann reviews the latest release of GDP figures in New Zealand.

Key Takeaways

New Zealand has entered a technical recession, with the economy contracting by 0.1% q/q in 1Q23, in comparison to the revised 0.7% q/q fall in 4Q22 (-0.6% q/q previously). The reading was sharply below the Reserve Bank of New Zealand (RBNZ)’s projection for 0.3% growth.

Overall, there is a high degree of uncertainty surrounding the latest GDP figure, as the COVID-19 pandemic has significantly disrupted the usual seasonal patterns in the data. However, the downturn was exacerbated by the effects of extreme weather that hit the country through Feb and Mar. We have lowered our GDP growth forecast for 2023 to 0.7%, from 1.3% previously.  

The Reserve Bank of New Zealand (RBNZ) has undertaken its most aggressive policy tightening since 1999, when the official cash rate (OCR) was introduced, lifting it by 525bps since Oct 2021 to 5.50%, a 14-year high. However, it has signaled that it has finished hiking. We maintain our view for the OCR to remain at 5.50% for now. The next RBNZ meeting is on 12 Jul.