Macroeconomic Forecast Israel

We anticipate 3.0% growth in 2005, rising to at least 3.6% in 2006, with upside risks from planned tax cuts and from the ongoing tourism recovery. Though the Bank of Israel kept the headline interest rate on hold at 3.5% in August, we think the cycle of monetary easing is coming to an end. However, interest rates will remain low by historical standards.

Government View: The 2006 budget is based on an assumption of 3.9% GDP growth. The central bank's forecast is marginally higher at 4.0%

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