Treasury is likely to slash its forecast for economic growth when it provides its next update, the economic agency's boss John Whitehead says.
Prime Minister John Key's incoming government received a gloomy assessment of the economy a fortnight ago, but Mr Whitehead, who travelled to Peru with Mr Key for the Apec summit said Treasury's half yearly update next month would be even worse.
Its current forecast for the year to March 2009 was for 0.4% growth, but that was likely to be slashed to near zero due to the shrinking world economy.
"Our forecast we presented to the incoming government after the election was at a very preliminary stage," Mr Whitehead told Radio New Zealand.
"We're certainly working through those, reassessing our view of the world economy and the fiscal implications of that.
"On the economic outlook, I think we would certainly, like many others, be adjusting our outlook downwards quite frankly at the moment."
He blamed the rapidly deteriorating world economy for the gloomy picture, which included unemployment jumping from its current 4.2% past the 5% mark.
But Mr Whitehead said low crown debt gave the Government some leeway to offset the negative economic conditions and the Reserve Bank had plenty of room to stimulate the economy by cutting official interest rates. Economists predict the Reserve Bank to cut rates by a full percentage point next week, with some even calling for a record 1.5 percentage point cut.
Meanwhile Apec leaders, including Mr Key, issued a declaration yesterday pledging to act "quickly and decisively" to overcome the global financial crisis.
"We are convinced that we can overcome this crisis in a period of 18 months."
But Mr Key later was one of several leaders to cast doubt on whether that timeframe was achievable, saying no one knew exactly how long the global financial crisis would run for.
Mr Key said the 18-month timeframe was "aspirational".
However, he was buoyed by a firm commitment from the 21 Apec leaders to send their foreign ministers to Geneva next month in a bid to re-start the stalled Doha Round of World Trade Organisation (WTO) talks.
He said the onus was now on all leaders to make sure their ministers and officials carried through on their words.
Mr Key welcomed additional commitments to pursue stimulatory fiscal policies and to avoid erecting new trade barriers in the aftermath of the global market meltdown, regardless of domestic political pressure.
Mr Key met US President George W Bush and China's President Hu Jintao at the summit, along with Australian Prime Minister Kevin Rudd and the heads of Russia, Chile, Singapore, Japan and Korea.
Mr Key today arrives in London where he will tomorrow meet the Queen at a giant rugby ball promoting the 2011 Rugby World Cup and exchange notes on the recent Apec and the G20 meetings with British Prime Minister Gordon Brown.
