OECD cuts Israel's growth forecast
International economic organization estimates Israeli GDP will grow 2.9% in 2012, compared to previous forecast of 4.7%. Economy expected to avoid recession but experience slowdown
According to OECD estimates, Israeli GDP will grow by 4.7% this year compared to the previous forecast from May of 5.4%. The 2012 forecast was cut from 4.7% to 2.9%.
According to the organization's forecast, the Israeli economy will avoid recession, but the drop in outside demand will lead to a slowdown in GDP growth, which is expected to change in mid 2012.
European debt crisis' impact to spread (Photo: Moti Kimchi)
Cutting the growth and unemployment rate forecasts, in addition to lower inflation and spending expectations, have led to a more relaxed monetary policy, the OECD stated in its latest Economic Outlook.
Israel's unemployment rate is expected to stand at 5.6% this year, according to the OECD forecast. This rate will reach 6% in 2012, and is expected to drop to 5.8% in 2013.
Stark warning on global economy
As for the global economy, the Paris-based OECD said policy makers around the world must "be prepared to face the worst," as the economic impact of Europe's debt crisis threatens to spread around the developed world.
Continued failure by EU leaders to stem the debt crisis that has spread from Greece to much-bigger Italy "could massively escalate economic disruption" and end in "highly devastating outcomes."
The half-yearly update also recommended urgently boosting the EU bailout fund and called on Europe's central bank to do more to stem the crisis.
The OECD now forecasts the eurozone economy to be in a six-month recession lasting through the first quarter of 2012, followed by a slow recovery that will leave the 17-nation bloc with only 0.2% growth next year.
The OECD expects the United States to grow by 2% next year and 2.5% in 2013, while the Japanese economy is forecast to grow 2% next year and 1.6% in 2013.
The Associated Press contributed to this report
