(Bloomberg) -- New Zealand will avoid a recession as more tourist arrivals, cyclone recovery and government spending support growth, according to Treasury Department forecasts.

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Gross domestic product will increase 1% in the year through June 2024, with growth in every quarter this year, according to projections published in the budget Thursday in Wellington. That compares with December’s fiscal update that forecast three consecutive quarters of contraction.

“The rebuild following the North Island weather events, a quicker return of tourism and less-contractionary fiscal policy are going to offer more support to the economy than anticipated,” Treasury said. “While we no longer anticipate a technical recession during 2023, growth remains low and labor market conditions will begin to deteriorate.”

Treasury’s view now contrasts with the Reserve Bank, which forecast a recession in its February policy statement. The RBNZ will publish fresh forecasts next week as surging immigration prompts economists to reassess how much inflation pressure remains in the economy, and how much the central bank needs to raise interest rates.

Immigration is forecast to be 80,000 higher than previously expected with annual arrivals peaking at 65,000 in mid-2023, Treasury said.

The Treasury continues to expect inflation will slow and return to within the Reserve Bank’s 1-3% target in late 2024.

Still, the government’s fiscal policy settings will be expansionary in the year through June 2024, which will add to price pressures, and it expects high interest rates will continue for longer.

“Weakness in economic demand over 2023 is expected to be less marked, which will translate into tighter monetary policy,” it said.

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