The first-quarter GDP numbers will be released today, showing the impact of the Covid-19 pandemic, which forced the shutdown of most businesses.
The early months of the pandemic hit the New Zealand export sector "pretty hard", Kiwibank chief economist Jarrod Kerr says. Photo: 123RF
Broad expectations are for a drop in gross domestic product (GDP) of about 1 percent for the three months ended March on the previous quarter, thefirst contraction since the end of 2010.
Kiwibank chief economist Jarrod Kerr told Morning Report the first quarter saw the start of the pandemic that led to significant trade disruption as China closed its borders.
"We saw parts of our export sector being hit pretty hard before we ourselves went into lockdown in the last week of March," he said.
"We're looking at a fall of about 1 percent which is significant and then a fall of around 16 to 18 percent in the quarter that we are in right now which is unprecedented."
He compared it with the Great Depression of the 1930s.
"The uncertainty around borders and when foreign tourists will return is really affecting the outlook for many small-medium businesses in those sectors" - Kiwibank chief economist Jarrod Kerr
However, transactional data of credit and debit cards showed an improvement.
He said moving into lower alert levels sooner dropped the previously anticipated GDP fall rate of 25 percent.
There was a need to stimulate the domestic economy to offset the pressures felt by the tourism and international education sectors, he said.
"We need to see more from the government and do I expect we'll see more from the Reserve Bank, they'll expand their quantitative easing to make sure interest rates stay low for longer. We really have dug a hole here that we need to try and get out of.
"Our unemployment rate is likely to spike from about 4 percent to at least 8 percent and it is going to take some time to absorb those people back into the workforce."
He said businesses feared going back into lockdown.