ASB/Commonwealth Bank economist Chris Tennent-Brown said Otago did well in the 2008 rankings. However, the province was facing "quite a few headwinds at present".
"Like other regions, the outlook remains tough," Mr Tennent-Brown said in a statement yesterday.
Otago fell from a two-star rating to one for the past quarter, joining Northland and the Manawatu-Wanganui areas as the only three of 16 areas on one star - out of a possible five.
Canterbury and Wellington have the highest ratings on three stars, with the remainder on two stars.
Positives for Otago were that unemployment was below the national average and overall employment numbers were still up on a year ago, Mr Tennent-Brown said.
However, house prices fell 8% in the past year, the construction outlook remained weak, visitor nights were down, retail spending had declined in the last year and there was weakened consumer confidence.
"[Otago] guest nights are down in line with the national average, which makes life tough in this tourism hotspot," he said.
He noted that Canterbury retained a three-star rating, not because it was "steaming ahead" but was "grinding through the recession" and while it also experienced declines in several areas, its confidence levels remained high.
