The New Zealand Institute of Economic Research is painting a gloomy picture of the economy's recovery from the recession.
Production had been expected to increase by 2.7% this year and 3.1% in 2011.
However, in its latest quarterly predictions, the NZIER says this is too optimistic and expects growth of 2.6% in 2010.
It is most pessimistic about 2011 when it expects the recovery to run out of steam. Growth will slow to 1.4% as a boost from re-stocking shelves emptied during the recession peters out.
The institute says the Reserve Bank will be forced to revise its mid-year timetable for lifting the Official Cash Rate.
NZIER says the outlook means the central bank will now lift the Official Cash Rate in September this year. The cash rate has been at a record low of 2.5% since 30 April 2009.
Since June 2008, the cash rate has been lowered from a record high of 8.25%.
