Christopher Luxon
New Zealand Prime Minister Christopher Luxon Image Credit: REUTERS

Wellington: New Zealand's economy has limped out of recession, official data showed Thursday, but the country's finance minister has warned inflation still casts a "long shadow".

The new economic figures were better than experts had anticipated following a gloomy 18 months that saw the economy shrink in four of the last five quarters.

New Zealand's economic output grew by 0.2 per cent between January and March this year, StatsNZ figures showed.

A recession is commonly defined as two consecutive quarters of contraction.

Finance Minister Nicola Willis said it was a positive sign but that the country was still battling rampant inflation and cost-of-living pressures.

"New Zealanders are feeling the long shadow of a prolonged period of high inflation, with high interest rates contributing to a deeper and more persistent downturn than previously forecast," she said.

Once dubbed a "rock-star economy" for its ability to weather financial crises, New Zealand's crucial agriculture and tourism sectors have been battered in recent years.

Natural disasters have devastated huge swathes of farming country, while global supply chain issues have hurt the isolated island nation more than most.

Tourist numbers have struggled to match the peaks seen before the Covid pandemic.

New Zealand's centre-right government unveiled a tax-cutting budget last month despite a tough economic outlook.

To pay for it, Prime Minister Christopher Luxon said he would tighten government spending, having already shed thousands of jobs in the public sector.