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New Zealand economy expected to grow by 3 percent

October 24, 2011

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WELLINGTON, New Zealand—New Zealand's government predicts the country's economy will grow by an average of about 3 percent over the next four years as earthquake rebuilding helps offset a global economic downturn.

The projections released Tuesday by the country's treasury department were upbeat after two ratings agencies recently downgraded New Zealand's debt from AA+ to AA.

However, while the government predicted an improvement in household savings, it also predicted a widening trade gap and debt to peak at 29 percent of the economy.

Rebuilding from the Christchurch earthquake is expected to add more than 1 percent to the country's economy over the next two years. If the predictions prove correct, New Zealand is expected to tighten its fiscal policy and raise interest rates from historic lows.

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