The Government's books are expected to be significantly worse when Treasury issues the December economic and fiscal update on Thursday.
ANZ National bank chief economist Cameron Bagrie says the economy has deteriorated since the last official update before the election.
New Zealand is already in recession and Mr Bagrie says the economy is yet to stablise.
He forecasts the economy will contract 1.1% in 2009 and then recover to achieve 2.2% growth in 2010 and 4% in 2011.
Separately, the latest assessment of prospects by economic forecaster BERL is for a contraction of 1.3% in the year to March 2009, returning to growth of 1.8% and 2.6% the two following years.
BERL says the economy is likely to experience a weak, investment-led recovery.
