An IMF report to be published tonight predicts renewed growth, lower inflation and higher unemployment for Israel in 2003.
The IMF's "Global Economic Forecast" is being published on the eve of the IMF-World Bank semi-annual conference that opens in Washington on Sunday. The report forecasts global growth of 2.8% in 2002 and 3.7% in 2003.
The IMF's 2002 forecast for Israel is bleak: GDP will shrink by 1.5% in real terms, inflation will surge to 6.2%, and unemployment will rise to 10.7%.
Only two other countries of the 29 covered by the report have shrinking GDP: Japan and Iceland.
The IMF predicts that Israel's economy will improve in 2003: GDP will grow 1.8% in real terms, inflation will fall to 3%, but unemployment will rise further to 10.9%.
The IMF's forecast is more optimistic than the Ministry of Finance's, which forecasts only 1% growth next year.
In its chapter on the Middle East, the IMF's economists write that growing economic and political uncertainty arising from the security situation caused downward revisions of Israel’s growth forecasts for 2002 and 2003.
"Security fears added to the pressures already apparent in 2001, following the global slowdown and problems in the information technologies market," states the report.
The report notes that rising exports, relying on the fall in the value of the shekel and strong global growth, will contribute to Israel's economic recovery in 2003, especially if regional tensions abate.
The report adds that Gaza and the West Bank have been severely damaged by the security situation. GDP in the territories is expected to contract by 20% this year.
Published by Globes [online] - www.globes.co.il - on September 25, 2002