Treasury has confirmed that its gloomy economic forecasts in December now look too optimistic as the outlook for the New Zealand and world economy continues to deteriorate.
Treasury's economic summary for February painted a grim picture saying since its last updated forecasts the local economy was showing all the sign of a downturn, while there had also been "sharp downturn" in the international outlook.
In December, Treasury predicted the economy would decline by 0.2 percent in 2009 and 0.3 percent in 2010.
"Risks have increased that economic growth will be below Treasury's downside scenario," the report said.
"There is a wide range of possible outcomes for growth at this time, with large uncertainty surrounding both domestic and international economic conditions."
The report summarises recently released economic data which showed:
* Domestic demand weakening with December retail sales falling and the January data indicating a weak start to the year;
* Unemployment increasing to 4.6 percent;
* Growth forecasts for international trading partners contracting;
* Falling house prices because of weak labour markets and lower net migration; and
* Fewer new homes being built.
