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Israel's central bank has raised its economic forecast for 2010, citing an improved outlook for global growth and world trade.

The Bank of Israel now expects the economy to grow 3.5 percent this year, compared with its previous September forecast of 2.5 percent.

The bank said the recovery of the global economy has increased demand for Israeli exports, though it cautioned that it could scale back the forecast if the recovery slows.

Israel has for the most part weathered the world financial crisis, thanks largely to a conservative banking system that had little exposure to mortgage-backed assets or risky loans.

The Bank of Israel was among the first in the developed world to raise interest rates after the global economic crisis.