The OECD forecasts negative 2% growth in 2009 for Israel's economy, and that economic growth will only be 0.2% in 2010.
The predicted contraction in 2009 is based on the global recession which will cut Israeli exports. Israel's exports are expected to drop 25% in 2009, and to only rise 2.6% in 2010.
An OECD Economic Outlook report says that the recession in Israel is at its height, due to high exposure to global trade. However, the damage is limited, by only small difficulties in the Israeli financial system and by the lack of a real estate prices bubble in Israel. Growth will return by the end of the year, but will be moderate.
The report noted that the ability of Prime Minister Benjamin Netanyahu's plan to lower the income tax burden at the beginning of 2010 in order to save the economy from the recession will be limited, since it will make it harder for the government to cut the budget deficit to 3% of GDP in 2011, compared with 6% this year and 5.5% in 2010.
The OECD emphasizes that Israel must be adamant on cutting the deficit, saying, "In the short term fiscal discipline seems reasonably assured, but less so in the medium term."
Israel's GDP shrank 3.9% in the first quarter.
Published by Globes [online], Israel business news - www.globes-online.com - on June 24, 2009
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