WELLINGTON, July 7 New Zealand's economy may already be in recession and will post lower annual growth than forecast in May's government budget, the Treasury said on Monday.
Data released over the past month had confirmed a sharp slowing in growth and weakness in the June quarter, the department said in its monthly economic commentary posted on its Web site (www.treasury.govt.nz).
"It is possible that the economy has experienced a technical recession (when real GDP declines for two consecutive quarters) in the first half of 2008," the commentary said.
"Economic growth in the year to March 2009 is expected to be weaker than we forecast in the Budget Update, especially if oil prices remain elevated," it said, trimming its forecast by half a percentage point to 1 percent.
The economy contracted 0.3 percent in the first quarter, in line with market and central bank expectations, as domestic activity slowed and drought hit agricultural exports.
Many private sector economists are expecting the second quarter to be as bad or worse.
This would deliver two consecutive quarters of contraction for the first time in a decade.
A series of surveys have shown business and consumer confidence at multi-year lows due to the impact of a slowing housing market, job losses, and higher food and energy costs.
However, the Treasury said the economy could be expected to recover in the second half of the year under the impact of high dairy prices boosting farmer incomes and cuts to personal tax rates, which come into effect on Oct. 1. (Reporting by Gyles Beckford; Editing by James Thornhill)