The Treasury will announce higher forecast deficits than previously expected when it updates its outlook for the economy next month.
Finance Minister Bill English says forecasts to be released on 14 December will show lower-than-expected economic growth in the year to March next year.
He says the lower growth forecasts are due to a weaker outlook for the world economy, less spending by households, and the effects of the Canterbury earthquake on 4 September.
Mr English says Treasury forecasts will show a rebound in the economy, and an improvement in the Budget deficit, in 2012.
He says that while the Government is facing significant challenges, it is committed to balancing the books by 2016.