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Economy

New Zealand GDP grows record 14% in 3Q after COVID lockdown

Economy beats forecasts with strong performance after stalling earlier this year

New Zealand Prime Minister Jacinda Ardern said the rebound from the pandemic came from realizing that the nation’s health system could not cope with a big outbreak.   © AP

WELLINGTON (Reuters) -- New Zealand's economy grew a record 14% in the third quarter, bouncing back from a COVID-19 lockdown earlier in the year that shut businesses and brought activity to a standstill, official data showed on Thursday.

Annual gross domestic product (GDP) rose 0.4%, Statistics New Zealand said, with both figures beating expectations in a Reuters poll for quarterly growth of 13.5% and an annual contraction of 1.3%.

The GDP numbers also topped the Reserve Bank of New Zealand's November forecast of quarterly and annual growth of 13.4% and minus 1.3% respectively.

The New Zealand dollar was largely muted in response, as markets had factored in a strong recovery after a sharp contraction in the second quarter following COVID-19 restrictions.

Second quarter GDP was revised to a drop of 11.0% from an initial estimation of minus 12.2%. On an annual average basis GDP fell 2.2 percent in the year ended September 2020. "This is as close as you get to a true V-shaped recovery," said Kiwibank Chief Economist Jarrod Kerr.

All industries recorded large increases in activity, and a second wave of infections in Auckland in August appears to have had a muted impact, he said.

New Zealand is among a handful of countries that managed to contain COVID-19 within its borders. Businesses, schools and offices have returned to almost pre-COVID normalcy.

The Treasury said on Wednesday it expected the country to bounce back sooner than previously thought.

Fiscal and monetary stimulus has played a part in the rebound, and today's results could move the dial on how much further support is needed, Westpac Bank said in a note.

"For the Reserve Bank's part, the bottom line is whether inflation is on track to meet its mandated target. A stronger than expected economy certainly goes in that direction, but this needs to be balanced against other developments such as the sharply higher New Zealand dollar," said Westpac senior economist Michael Gordon.

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