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Bank Hapoalim yesterday became Israel's first big financial firm to raise its growth forecast. The bank now thinks the Israeli economy will shrink 0.3% this year. Six months ago it had expected a decline of 1.2%. Hapoalim also revised its forecast for 2010; the bank now expects growth of 3% - double its earlier view.

The Bank of Israel and other financial institutions are expected to soon follow suit and raise their forecasts.

Hapoalim says the adjustments followed "recent Israeli and international macroeconomic data which in many countries point to a transition to positive growth in the second quarter of this year."

Bank sources estimate that the global economy will shrink 1.2% in 2009 and grow 3.6% in 2010, a more optimistic forecast than the one made by the International Monetary Fund. The IMF predicted last month that the global economy would shrink 1.4% in 2009 and grow 2.5% in 2010.

Economic growth figures for Germany, France, Japan and a number of developing countries in Asia in the second quarter stood out on the optimistic side, Bank Hapoalim found, and manufacturing in the United States improved last month as well.

Hapoalim warns, however, that a real economic recovery requires unemployment to stabilize and improve. At some point the recovery will involve central banks moving in to increase interest rates.