(Updates with Treasury comments in fourth paragraph.)
Feb. 7 (Bloomberg) -- New Zealand’s economic prospects have worsened since forecasts were published in November amid the escalation of Europe’s debt crisis, the Treasury Department said.
While the outlook isn’t yet near a downside scenario included in the November update, “the risk of something as bad as it occurring has risen,” the department said in a report on its website. The report doesn’t contain detailed growth forecasts, which will be published Feb. 16.
Europe’s crisis may curb global sentiment and demand for New Zealand’s exports, which make up 30 percent of the economy. The recovery is being slowed by a rise in household saving and a delay in the acceleration of rebuilding in earthquake-damaged Christchurch until late 2012, the Treasury said.
The department said revisions to gross domestic product figures published in December suggest the economy’s potential output is lower than it had estimated.
The economy probably expanded 0.6 percent in the three months ended Dec. 31, it said.
In November, the government forecast the economy will grow 3.4 percent in the year ending March 31, 2013. In an alternative forecast based on the U.S. economy contracting and higher bank financing costs, growth would be 2.5 percent, it said.
Central bank Governor Alan Bollard last month said growth in 2012 isn’t likely to reach the 3 percent pace he forecast in December, because the Christchurch rebuild won’t start “in earnest” until 2013.
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--Editors: Brendan Murray, Chris Bourke
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