The Treasury says New Zealand's economic outlook has worsened further because of the prolonged debt crisis in Europe.
In its monthly economic summary, it says the outlook for 2012 has deteriorated since the Pre-election Update due to the impact of the escalating euro zone crisis.
In December, the Treasury downgraded its growth forecast for the year ending March 2013 to be closer to 3% from 3.4%.
It says the risk of a downside scenario has risen since October and economic forecasts could be subject to large changes within short periods of time.
The Treasury will issue revised forecasts in the Budget policy statement next week.