The Paris-based Organization for Economic Cooperation and Development (OECD) said in a report last week that Israel's economy will experience negative 2% growth in 2009 as the global financial crisis undermines demand for exports and that growth will recover in 2010, with the economy expanding 0.2%.



The OECD forecasts that exports are expected to contract by 25% this year and expand by 2.6% next year.



The OECD report also noted that "Recession is now under way, due largely to high exposure to international trade, but it is being tempered by the relatively mild difficulties in domestic financial markets and the absence of a house-price bubble". Gross domestic product contracted by an annualized 3.9% in the first quarter and is expected to shrink by 1.5% for the year. Inflation is likely to slow down to2.6% in 2009, from 3.8% last year, and ease to 1.1% in 2010, the OECD said.



The government's annual target for inflation is between1% to 3%. The report also noted that the ability of the government plan to lower the income tax burden at the beginning of 2010 in order to save the economy from the recession will be limited, since it will make it harder for the government to cut the budget deficit to 3% of GDP in 2011,compared with 6% this year and 5.5% in 2010.