The Bank of Israel attributes the drop in growth in 2012, from its estimate of 4.8% in 2011, to a slowdown in domestic and export demand, due to the deterioration in global conditions, specifically the debt crises in Europe and their effects. It expects private consumption to fall from 4.7% in 2011 to 1.4% in 2012, export demand growth (excluding diamonds and start-ups) to slow from 2.1% to 1.2%, and civilian imports growth to slow from 8.8% to 1.4%. The Bank of Israel cut its exports growth forecast from 3.9%, made in September, due to the sharp decline in exports in the third quarter.
The Bank of Israel also expects unemployment rate to rise from 5.6% in the third quarter to 6.4% in the fourth quarter of 2012, and participation in the labor force to climb slightly to 57.6%.
The Bank of Israel also expects the inflation rate to fall to 2.1% in 2012, near the midpoint of the government's 1-3% inflation target, down from 2.5% this year.
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