New Zealand’s economic recovery from a 2024 recession gathered pace in the first quarter as the central bank lowered interest rates and exports surged.

Gross domestic product rose 0.8 percent in the three months through March, accelerating from a downwardly revised 0.5 percent growth in the fourth quarter, Statistics New Zealand said Thursday in Wellington. The result was slightly better than the 0.7 percent growth expected by economists.

While the economy is still smaller than it was a year ago, its recovery will be welcomed by the government as it makes growth a key priority ahead of a 2026 election. That ambition is being tested by the uncertainty arising from global trade tensions, which is damping spending and investment and raising concerns that the expansion may weaken.

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“Repair of the economy is underway but significant risks are apparent,” said Nick Tuffley, chief economist at ASB Bank in Auckland. “Data since March suggest a sizable deceleration in economic activity. Geopolitical deterioration in the Middle East presents upside risks to inflation and therefore pricing behavior.”

The New Zealand dollar was little changed after the GDP report, buying 60.29 US cents at 11:30 am in Wellington. The yield on two-year government bonds rose 2 basis points to 3.44 percent.

RBNZ Easing

Buoying the economy, farm production improved in the quarter while food manufacturing also lifted, the statistics agency said.

Taken together with high global commodity prices, that has seen a boost to rural incomes and growth in the regions even as the cities have been encumbered by a sluggish housing market and cautious consumers.

Lower interest rates are expected to underpin steady growth in 2025 even as the Reserve Bank hints it may be nearing the end of its easing cycle.

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The central bank has cut the Official Cash Rate aggressively, reducing the benchmark by 225 basis points since August to 3.25 percent. Still, last month it removed an explicit easing bias ahead of its July decision.

Investors no longer see much chance of the OCR falling below 3 percent this year, swaps data show.

“With the economy regaining its footing sooner than expected after last year’s sharp downturn, we continue to expect that the RBNZ will take the opportunity to pause and assess the situation at its July OCR review,” said Michael Gordon, senior economist at Westpac in Auckland.

Growth was stronger than the 0.4 percent that both the RBNZ and the Treasury Department forecast. Treasury Chief Economist Dominick Stephens yesterday said that while recent data has been weak, he still expects growth to pick up in 2025.

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From a year earlier, GDP fell 0.7 percent, which was less than economists’ estimated 0.8 percent decline. Still, the annual GDP contraction in the fourth quarter was revised to 1.3 percent from 1.1 percent.

Key drivers of the first-quarter expansion were farming and manufacturing, today’s report showed. Manufacturing grew 2.4 percent and goods exports increased 3.6 percent, led by primary products. Tourism fell.

GDP per capita rose 0.5 percent from the fourth quarter, its second straight gain after more than two years of decline.