SYDNEY – Australia is on its way to its first recession in 29 years after registering a drop in its gross domestic product (GDP) of 0.3% in the first quarter of the year, according to official data published on Wednesday.
In its first decline in nine years, the Australian economy contracted from January to March by 0.3%, according to data released Wednesday by the Australian Bureau of Statistics (ABS).
This placed annual growth at 1.4%, the lowest since September 2009, when Australia weathered the blow of the global financial crisis.
“This was the slowest through-the-year growth since September 2009 when Australia was in the midst of the Global Financial Crisis and captures just the beginning of the expected economic effects of COVID-19,” ABS chief economist Bruce Hockman said in a statement.
The decline is mainly linked to the 1.1% drop in domestic spending, especially on services, due to restrictions on businesses such as hotels and tourism, as well as air transport.
After the outbreak of the novel coronavirus epidemic, the Australian government imposed a series of restrictions and ordered the closure of businesses to stop the spread of the virus while implementing economic aid and stimulus packages equivalent to 13.3% of its GDP.
Although it takes two consecutive negative quarters to be considered a recession, Australia is expected to have a deeper contraction in the next quarter as a result of the epidemic, Treasurer Josh Frydenberg said Wednesday at a press conference.
When asked if Australia is currently in recession, Frydenberg said “the answer to that is yes. And that is on the basis of the advice that I have from the Treasury Department about where the June quarter is expected to be.”
The Reserve Bank of Australia estimates that GDP will drop 6% during 2020 and the unemployment rate may reach 10%.
Before the epidemic, the country had registered almost 30 years of consecutive economic growth.
With at least 7,220 confirmed coronavirus cases, including 102 deaths, Australia has started to resume its economic activities with the aim of full normalization by July.