5 Dec 2011

Treasury cuts New Zealand growth forecast

4:21 pm on 5 December 2011

Treasury has cut its forecast for the economy for the coming year.

The government department is forecasting the economy will expand by 2.6% in 2012, down from the 3.1% it forecast in the pre-election update released in early October.

The forecast is lower because Europe's financial crisis has escalated and growth forecasts for the continent have been downgraded, as have those of other trading partners.

Treasury also expects growth will be lower in years to come but says it is too early to forecast this.

Treasury also said the government's operating deficit for the four months to the end of October was almost $3.4 billion.

That was 4.1%, or $131 million, worse than forecast the pre-election update.

But it was better than the $2.5 billion deficit for the three months to the end of September, which was nearly 10% worse than predicted in the update.