Last Thursday’s GDP figures showed a surprise contraction in Q4 of 1% as the border closures hit the New Zealand tourism sector particularly hard. This came on the back of a particularly strong rebound in Q3 13.9%. The slump came as a surprise to most forecasters with market expectations being for a modest 0.2% increase. GDPlive was an outlier, showing a much more pessimistic prediction for Q4 and 2020. However, it seems that the machine learning model was much closer on an annual basis than the human forecasters, raising the possibility of a double dip recession.
Tourism had previously been the country’s biggest foreign exchange earner and the lack of overseas visitors due to the ongoing border closures has been devastating for the industry. The roll-out of the COVID-19 vaccine and a frequently-touted “travel bubble” with Australia is expected to provide some relief over the course of 2021, but last week’s GDP figures are a reminder that the volatility will continue for some time yet.