The NSW economy is set to suffer a $1 billion hit due to the shutdown of businesses in Victoria, but the negative effects will be offset to some extent as economic activity shifts to NSW because of restrictions south of the border.

Key economic sectors in Victoria, including retail, construction and manufacturing, will be severely limited under sweeping measures announced on Monday by Premier Daniel Andrews to try and contain the spread of coronavirus.

Terry Rawnsley, an expert in Australia’s regional economies, forecasts the cost of Victoria’s stage three and stage four restrictions imposed in response to its COVID-19 second wave will be between $20 and $25 billion during the September quarter.

He estimates the cost to the NSW economy, which is highly integrated with Victoria’s, is likely to be around $1 billion.