The Bank of Israel now expects the economy to grow 3.5% this year, compared with its previous forecast last September of 2.5%. Earlier, Bank of America-Merrill Lynch and Bank Leumi, one of Israel’s largest banks, also raised Israel’s economic growth forecast for 2010 to 3.5%.
Based on data through November, Israel’s gross domestic product (GDP) in 2009 increased 0.5% from a year earlier, compared to an OECD average of negative 3.5%, the Central Bureau of Statistics said. In the third quarter, the economy expanded at an annualized rate of 3%, while from April to June it grew by 1.1%.
GDP growth per capita in Israel fell 1.3% in 2009 (compared with a 4% drop in OECD countries), while unemployment in Israel stood at 7.7% in 2009 (compared with an average of 8.2% in the OECD).
Israel’s budget deficit was 5.2% in 2009, and is expected to be 5.5% in 2010. Israel’s debt-to-GDP ratio increased by a very low 3%, ending the year at 78% as other countries struggled amid the international economic crisis.
For the most part, Israel weathered the world financial crisis thanks to, among other factors, a relatively conservative banking system that had little exposure to mortgage-backed assets or risky loans.
The Bank of Israel raised Israel’s key lending rate to 1% in late December, after having cut borrowing costs to a record low of 0.5% in early 2009. The Bank of Israel was among the first in the developed world to raise interest rates after the global economic crisis.