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Tuesday, January 27, 2009

Gaza war grips Israeli economy

Mon, 26 Jan 2009 11:14:49 GMT   |   PressTV

Israel's economy will fall this year for the first time since 2002 because of the gloomy global economy and the effect of the Gaza offensive.

In its latest report Israel's central bank said Tel Aviv's budget deficit would stand equal to about 4 percent of the gross domestic product. The bank says the economy is expected to fall by 0.2 percent in 2009.

The report noted that the deficit is a part of the cost of Israel's 23-day offensive in Gaza, which killed 1330 Palestinians and injured 5,450 others.

The war, according to the bank, will widen the budget deficit to 4.1 percent of the GDP from 2.1 percent in 2008 and will also discourage tourism.

The bank revised its estimate from 1.5 percent growth for 2009, saying the economy will plunge this year for the first time since 2002.

"We are producing much less than we predicted and much less than in previous years," said Yosef Saadon, a spokesman for the Bank of Israel.

The Tel Aviv Stock Exchange's benchmark TA-25 Index shrank by 4.4 percent to 637.23 last week.

The bank is preparing to cut the key interest rate from a record-low 1.75 percent to help the ailing economy.

After the start of the war, economists warned that the Israeli economy would be threatened if the invasion of the Gaza Strip was prolonged or the scope widened.

The estimated daily cost of the military operations stood at tens of millions of shekels (dollars).

According to Israeli daily Haaretz, Israeli economists acknowledged that the costs of the attacks on Gaza would skyrocket if Tel Aviv called up large reserve forces or launched a ground attack.

The Israeli Defense Ministry declined comment. 

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