The country is edging closer to a recession because of recent events, says an investment banking firm.
Dairy prices have declined sharply Photo: 123RF
First NZ Capital said a dramatic slump in dairy prices will lead to an economic slowdown.
The Government has rejected the prospect of a recession, saying other parts of the economy are stable, and the world economy is growing.
Chris Green, who is the director of Economics and Strategy at First NZ Capital, said there was a 25 to 30 percent chance of a recession.
"A couple of months ago I would've put the probability around the five to 10 percent mark and what we've seen recently - you know, the sharp decline in dairy prices, the reduction in the pay out from Fonterra, and the sharp fall in business and consumer confidence.
"But I think more recently, one of the developments that we're thinking, maybe, is what we're seeing within the Asian region and the potential fall out from a slower China in to the Asian countries that we trade with as well."
Chris Green, from First NZ Capital which is allied with the Swiss banking giant Credit Suisse.