Wellington  - New Zealand consumers, who have kept their wallets closed as the economy moved into recession for the first time in nearly 10 years, will fire a gradual to ecovery when they start spending again next year, an influential think tank predicted on Tuesday.

The New Zealand Institute of Economic Research (NZIER) forecast the recession to continue through the current fiscal year ending in March with economic activity contracting to its lowest point of 0.1 per cent

It would recover slowly during next year, with private consumption stimulated by lower petrol prices, falling interest rates and tax cuts, and then accelerate from 2010, NZIER said in its scheduled quarterly predictions.

Its analysts predicted modest growth of 1.6 per cent in the year to March 2010, lifting to 3.3 per cent the following year.

They forecast the current recession to remain relatively shallow, but the recovery to be gradual because of the lagged effect of prolonged high interest rates and tighter credit requirements in recent months which would dampen investment growth.

They also said export growth would be limited by weaker growth of New Zealand's trading partners than was previously anticipated.

Analysts are confidently expecting the Reserve Bank to stimulate the economy by cutting its benchmark interest rate at least a full percentage point to 5.5 per cent in a scheduled review of monetary policy on Thursday. (dpa)