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© Reuters. FILE PHOTO: A sailing boat can be seen in front of the central business district (CBD) of Wellington in New Zealand, July 2, 2017. REUTERS/David Gray By Praveen Menon

WELLINGTON (Reuters) – New Zealand’s economic growth swept past forecasts in the first quarter on the back of a housing boom and strong retail spending, avoiding a second recession and bringing forward expectations for tighter monetary policy.

Gross domestic product (GDP) rose 1.6% in the three months through to March, Statistics New Zealand said on Thursday, well ahead of a Reuters poll forecast of 0.5% growth and the Reserve Bank of New Zealand’s (RBNZ) estimate of a 0.6% fall.

New Zealand’s success in virtually eliminating the coronavirus in the country allowed it to reopen its domestic economy must before other advanced nations, boosting employment and consumer spending.

Westpac Bank said economic growth was estimated to be running at about 0.8% above levels prior to the global coronavirus outbreak.

The rapid recovery follows better than expected readings on key indicators like employment and retail spending in recent months that prompted the central bank to signal a move away from stimulatory monetary policy settings adopted during the COVID-19 pandemic, one of the first in the world to do so.

ANZ Bank said it was bringing forward its forecast for the central bank to hike its official cash rate to February 2022, saying “a year from now feels too far away”.

“Q1 data confirm NZ’s economic recovery has been spectacular relative to early-pandemic expectations. And while there are still pockets of weakness, they are getting hard to identify at the aggregate level,” said ANZ Chief Economist Sharon Zollner.

The better than expected GDP figures pushed the Kiwi dollar up 0.3% to around $0.7073.

Growth was largely driven by a surging housing sector amid historically low interest rates and cheap mortgages, although worries about housing affordability have led the government and RBNZ to introduce measures to try to cool the market.

Finance Minister Grant Robertson said in a statement that confidence in the recovery also led to a boost in retail spending, dining out and holiday accommodation, offsetting the loss of overseas tourism, but he warned there were still uncertainties.

New Zealand’s vaccine rollout has been slower than other nations, and the country’s border are expected to remain closed until 2022.

The GDP bounce comes after New Zealand reported a 1.0% fall in economic growth in the final quarter of 2020.

The country had rebounded from recession with a revised 14.1% quarter-on-quarter GDP growth in the three months to end-September last year. That more than reversed an 11% drop in the preceding quarter as the country observed strict lockdown measures.

Annual GDP rose 2.4% in the first quarter, Statistics New Zealand said, compared with analyst expectations for a 0.9% rise.