The Berejiklian government will deliver the smallest NSW budget surplus in seven years as the state’s coffers come under pressure from weaker than expected GST revenue and increased expenditure due to drought and bushfires.

The half-yearly review of the budget, to be released by Treasurer Dominic Perrottet on Thursday, is also expected to cut economic growth forecast for NSW this financial year from the 2.25 per cent predicted in the June state budget to 1.75 per cent.

NSW Treasurer Dominic Perrottet will announce an update of the state budget on Thursday. Credit:AAP

A drought-induced slump in rural exports, especially for cereal crops and textiles such as wool, will reduce the state’s economic growth by around a quarter of a percentage point in 2019-20.

This financial year's budget surplus will be $702 million, more than $300 million lower than the $1.016 billion that was forecast six months ago.