The Israeli economy will post negative growth of ¿0.4% in the year 2001, and plunge lower to ¿1% in 2002, says a Morgan Stanley Dean Witter report. The bank's analysts explain that Israel's economy has been under great strain due to global recession, in addition to the local political tensions.
The analysts assess the local economy will recover only in 2003, when U.S. and European markets recuperate. In 2003 they estimate a 4% growth rate.
The analysts believe it is now too late to adopt an expansive monetary policy, and they therefore support restrictive policy. They recommend moderate interest cuts due to the deteriorating fiscal policy apparent in the high government deficit and the 2002 government budget.