Bank of New Zealand senior economist Craig Ebert said by the time the gross domestic product figures were released in June, the country could be experiencing negative growth.
That could get worse as the year progressed, he said.
"Today's trade data leave us inclined to the view that first-quarter GDP economic growth will struggle to hold its head above water.
"To be sure, it's still very early days in getting some firm numbers on board. Many of the hard GDP indicators don't come out until June. Still, we'll be monitoring the situation very carefully.''
New Zealand's March trade performance was surprisingly weak, with dairy export values lower than expected while high volumes of oil kept imports up.
A $50 million deficit in the March trade balance contrasted with the median forecast in a Reuters poll which had been for a $395 million surplus.
Publishing the trade figures, Statistics New Zealand (SNZ) said it was only the second March deficit recorded in the past decade, the other being in March 2005. During the 10-year period, the average balance for March months was a surplus of $100 million.
What surprised many was the fall in the exports of milk powder, cheese and butter down 4%.
"This no doubt was starting to reflect the drought and the big fall in dairy production it has caused for the first half of the year. We expect this drought effect to keep dairy export volumes under downward pressure over coming months,'' Mr Ebert said.
SNZ figures disguised some of the worst effects of the slowing economy.
Although dairy products and crude oil exports again made the largest contribution to exports in the month, a fall in the average dairy price along with lower milk volumes contributed to the unexpected lower dairy exports.
Also, oil exports have started to fall, a sign that the peak in the Tui oilfield production is passed. SNZ noted that crude oil exports were at their lowest value in eight months.
The cost of imports rose 7.1%, from a year earlier, to $3.5 billion in March, while export revenue was up 3.7% to $3.4 billion. The latest figure took the trade deficit for the March year to $4.5 billion, or 11.9% of exports.
SNZ figures showed that for the March quarter, the seasonally adjusted value of exports at $10.4 billion was down 1.4%, or $150 million, from the record high of the previous quarter.
Despite that, the March 2008 quarter was still 14.1% higher than the next highest quarterly value which was recorded in September 2006.
Crude oil exports were down 21.2%, or $154 million, from the December quarter, while seasonally adjusted fruit exports were down 20.4%, or $83 million, largely driven by a decrease in kiwifruit.
A detailed look at the data suggested primary exports fell by about 6% in the first quarter, unwinding the huge 9.4% increase at the end of last year.
As primary export volumes account for 45% of total exports, total exports for the rest of the year are expected to fall.
Higher meat exports offset the March fall, but based on livestock slaughter statistics, slaughtering was high in January and February and collapsed in March.
ANZ-National Bank chief economist Cameron Bagrie suggested that farmers sent stock to slaughter early as dry weather conditions affected pasture growth and peak production had passed.
"This means the June quarter meat production and export numbers will show a large decline.''
