The Associated Press and Ha'aretz Service

Haaretz, 31 December 2002

Israel's economy shrank by 1 percent last year to post its worst performance since 1953, according to preliminary figures the Central Bureau of Statistics released Tuesday.

The adjusted gross domestic product fell in 2002 for the second year in a row, for the first time in the history of the state. Bureau official Soli Peleg said if

current trends continue, the economy will fall by up to 0.5 percent next year - a third straight year of contraction.

In 2002 the GDP fell by 1 percent, following a 0.9 percent drop in 2001.

Private consumption went down 0.6 percent in 2002, the first decrease since 1980. Specifically, private vehicle purchases decreased by 29 percent, furniture purchases by 12 percent and flights abroad by 4 percent.

The population grew by 2 percent, putting the GDP per capita at NIS 74,000 a year, a 3-percent decrease from last year. Due to the weakening of the shekel, the GDP is even lower when assessed in dollar terms. It now stands at $15,600.

Combined with rising inflation - expected to top 8 percent - that means the standard of living has fallen significantly.

The bureau also reported unemployment at 10.4 percent, up from 9.4 percent a year ago, and a 3 percent falloff in business sector output.

Newspapers summing up the economic performance warned many businesses were in danger of closing, after Bank of Israel Governor David Klein raised an uproar over the weekend by warning that the collapse of a major bank was possible.

Israel's economy grew more than 6 percent in 2000, but slumped abruptly in the fourth quarter of that year as peace talks fell apart, unrest choked off tourism, and the collapse of the Nasdaq Stock Market battered the country's high-tech sector, the economy's main engine of growth.

The statistics bureau also reported imports of goods and services fell 3 percent after dropping 4.5 percent in 2001, while exports of goods and services dropped 5.4 percent this year after falling 11.7 percent in 2001.

The bureau is scheduled to release final 2002 figures for Israel's major economic indicators in March.