Finance Minister Bill English is warning that New Zealand faces renewed economic challenges as the debt crisis in Europe gets worse.
Mr English says if Greece, and possibly Portugal, default on their debts this country will not be immune from the economic fallout.
However he says there is no need to panic, and he remains reasonably optimistic about New Zealand's prospects.
"We're slowly getting ourselves into a more competitive position - we're selling into markets that are still fundamentally growing pretty well, particularly in Asia, and we're a bit less dependent on our traditional US and Europe markets.
"But I don't think we'll get through unscathed."
In its September monetary policy statement the Reserve Bank lowered its forecasts for the next two years, saying it expects the economy to grow only 3.6% in the year to the end of March 2012 and 2.6% in 2013.
Mr English says despite the lower forecasts he is still confident the Government can deliver on its promise to create 170,000 new jobs in the next four years.
Mr English says it is already more difficult to borrow money on financial markets, although the Government is still able to borrow what it needs. Because it borrowed more heavily earlier in the year it has plenty of cash in its coffers to repay maturing debt.
Mr English says the economy has grown faster than forecast this year, but growth in the next two years now looks weaker.