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.
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.