While New Zealand has not felt the brunt of recession, the Treasury has slashed its forecast for economic growth for 2013 in view of volatile and weaker global economy.

New Zealand's real gross domestic product growth is forecast at about 3 per cent in the 12 months ending March 31, 2012, down about 50 basis points from its estimate in the Pre-election Economic and Fiscal Update (PREFU). The latest forecasts are contained in the department's briefing to the incoming Finance Minister, released Thursday although it was finalised on Nov. 25.

"Although New Zealand has so far avoided a severe economic shock, growth has been weak for some time and our large fiscal deficit and high external indebtedness continue to expose the economy to risks," Gabriel Makhlouf, secretary to the Treasury, said in the report.

Europe's sovereign debt crisis has worsened since PREFU, thus raising financial market volatility.

Among the Treasury's recommendations is a "wide and ambitious programme of policy reform" that would yield an operating surplus by 2014/15 and reduce net debt, excluding the NZ Superannuation Fund, to no more than 20 per cent of GDP by 2020, a related report on the NZ Herald said.