Buildings in Auckland, New Zealand, on Monday, May 22, 2023.
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New Zealand’s gross domestic product fell 0.1% in the first quarter, according to government data published Thursday, as its central bank embarked on one of the most aggressive rate hike cycles in the world.
The latest data from Wellington marks a technical recession for the economy, after reporting a revised 0.7% decline in the final quarter of 2022.
A technical recession is defined as two consecutive quarters of contraction.
Compared with a year ago, the economy grew 2.9% in the first quarter. Economists surveyed by Reuters expected New Zealand to mark a contraction of 0.1% quarter on quarter and growth of 2.6% year on year.
In its May meeting, the Reserve Bank of New Zealand raised its benchmark rate to a 14-year high, with the 25-basis-point hike lifting its official cash rate to 5.5%.
“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 Wednesday mission statement ahead of the GDP release.
The IMF also warned against the central bank turning to monetary policy easing measures, adding that it should still leave the door open for more rate hikes ahead.
“As non-tradable inflation persists, there is little scope to lower the OCR for a prolonged period,” the IMF wrote.
“A reignition of demand, including due to insufficient fiscal consolidation, and a stalling of inflation above target would call for further tightening of monetary policy,” it said.
This is a breaking news story. Please check back for updates.
