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Bank Hapoalim has released a gloomy forecast for 2002. The bank halved its economic growth forecast for 2002 to 0.8%. In 2001 economic growth shrunk by 0.5%. This means that in 2002 there will be an additional drop of 1.5% in product per capita, following a drop of 2.9% in 2001.

Analyst Ptachia Bar-Shavit said that the bank has updated its forecast for 2002 after the national accounts data for 2001 released by the Central Bureau of Statistics indicated a drop in gross domestic product for the fourth quarter of 2001.

According to the bank's calculations, economic growth in the fourth quarter shrunk by 6.6%, compared with negative economic growth of 5.4% in the third quarter.

Bar-Shavit said that based on the data released by the Central Bureau of Statistics, 2002 is opening at a lower level than the bank had estimated.

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He said that even assuming liberal monetary policy and restrictive fiscal policy, it is hard to see how the economy will lift itself out of the current recession.

Bar-Shavit said that it is estimated that the American economy will begin emerging from the recession in mid-2002, but the Israeli economy is burdened by security problems, which will encumber getting out of the present recession.

He said that today there is a more forgiving global attitude toward exceeding deficit targets. Bar-Shavit explained that foreigners will view more favorably a well-placed deficit of 4.5% that lifts the economy out of recession, than a deficit of 3% that leaves the economy weak.