Stats Bureau: Economy Will Grow 0.1% This Year

The Central Bureau of Statistics predicts that the economy will grow by an unusually low 0.1% this year. But that is better than the world's 30 most developed economies, members of the Organization for Economic Cooperation and Development: They are expected to see their economies shrink by a whopping 4.1%.

Even though the economy shrank by 1.8% in the first half of the year, the CBS expects positive growth for the year as a whole. That means it is forecasting substantial growth in the second half of the year.

In the first quarter of 2009, gross domestic product fell 3.3%. But the second quarter of the year saw the trend reverse, with GPD increasing by 1.0%.

The CBS revealed its economic forecast for 2009, along with data on the state of the economy at the end of the year's first half, at a press conference yesterday to mark publication of its annual statistical abstract.

The forecasts are based on data for the first six to eight months of the year, data trends and planned public-sector expenditures.

The Bank of Israel also updated its forecast for 2009 earlier this month, placing it at 0.0%, similar to the CBS forecast.

The Finance Ministry, however, has so far left its forecast for the year unchanged. It is predicting negative growth of -1.0%.

Exports to shrink by 10.5%

In 2008, the economy grew by 4.0%. Growth in the first six months of that year reached 5.3%, but fell to 0.9% in the second half of the year. This followed growth of 5.2% in 2007, 5.3% in 2006 and 5.1% in 2005.

The CBS predicts that the business product will shrink by 0.7% in 2009, after growing by 4.5% last year and 5.6% in 2007. Exports are expected to fall sharply this year, by 10.5%, and capital investments will be down 9.6%.

On the other hand, the CBS expects residential construction to increase by 4.7% this year, while public consumption will grow by 0.9% in spite of a 2.1% decrease in military spending.

Although private consumption will grow by 0.4%, the CBS said, consumption per capita, which is an indicator of the standard of living, is expected to shrink by 1.4% this year.