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The first-quarter economic data released by the Central Statistics Bureau three months ago were so surprising that some optimists believed an end to the economic stagnation was just around the corner. A period of economic growth would begin forthwith, they predicted.

That bubble of optimism burst yesterday, when the Statistics Bureau released results for the second quarter of 2003. Everything that rose during the first quarter, it turns out, fell during the second. This trend of decline applies to gross domestic product, private consumption, exports and residential building. The only part of the economy that showed steady growth over the two quarters was public consumption, particularly in the defense field - and this fact is a cause for concern.

Looking at data for the first half of 2003 as a whole, the news is this: We have not yet emerged from the darkness; instead, we are stuck in a rut. The economy is not growing, but neither has it taken a nose dive.

The contradictory findings from the first two quarters reflect something else as well: Israel's economy can never be judged on the basis of data from just one quarter of the fiscal year. For one thing, sharp seasonal fluctuations render statistics for a single quarter unreliable. The minimal reliable measure is data for a half-year period. In 2003, the first six months point to an economy that is standing still, after two years of decline.

Why, many are asking, has the economy failed to recover and show growth?

True, there are some sparks of recovery in the high-tech field, and there has been a degree of growth in the global economy (particularly in the United States). It is also true that Benjamin Netanyahu carried out a few growth-inducing measures, including tax reductions and privatizations. Yet such reasons for optimism about the economy are dwarfed by the country's ailing security-political situation.

Just last week, the country witnessed two terror attacks, and there is widespread concern that a massive terror strike could occur in the future.

Few people believe that the cease-fire will have a meaningful impact, and so tourists will continue to stay away from the country, and foreign investors will do likewise, preferring to bring their capital anywhere but Israel. Big capital, in short, hates risks and situations of uncertainty.

Israeli citizens are wary of returning to shopping malls. Beyond the fear of terror attacks, who can be sure that his or her job will be around tomorrow? In such a climate of uncertainty, investments are marginal and the economy has no way of breaking out of its malaise.

Israel did not enter this slump because of economic factors. The current stagnation does not reflect a low point in a classic "business cycle." Instead, the economic woes result from security-political problems.

Hence their solution is also not to be found in the economic realm: It is to be sought in the political-diplomatic sphere.