Macroeconomic Forecast Israel

Political risk is always a key factor in the Israeli economy and uncertainty in Q106 over the Israeli elections and the future of the peace process after the Hamas victory is likely to dampen investment activity, posing a downside risk to growth. However, we will wait until the new Palestinian and Israeli governments are formed before assessing the full implications of changes in political risk for our growth forecasts. As such, we continue to expect 4.0% real growth in 2006 and 3.8% in 2007. On the positive side, the elections pose little risk to the fiscal deficit, as all the

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