UPDATE 1-Israel economy grew 2.5 pct in fourth quarter

Sun Feb 17, 2013 7:04am EST

By Steven Scheer

JERUSALEM Feb 17 (Reuters) - Israel's economy grew at its slowest pace in 3-1/2 years in the fourth quarter, on slumping exports and investment as well as scant growth in consumer spending.

The Central Bureau of Statistics said on Sunday the economy grew by a lower-than-expected annualised rate of 2.5 percent in the fourth quarter.

For all of 2012, Israel's gross domestic product grew 3.2 percent, below a previous estimate of 3.3 percent and far weaker than a 4.6 percent spurt in 2011, although still higher than its main trading partners of Europe and the United States.

Growth is projected at 2.8 percent this year, excluding the start of natural gas production at a large well off Israel's Mediterranean coast.

Exports - which account for more than 40 percent of Israel's economic activity and have been boosted by an upgrade at an Intel manufacturing plant - fell 6.5 percent in the October-December period for a second straight quarterly drop.

Excluding diamonds and start-up companies, exports slid 16.3 percent.

Private spending edged up 0.3 percent while imports dipped 8.1 percent, their third straight quarterly decrease. Similarly, investment in fixed assets declined 11.7 percent, a fourth consecutive fall. Government spending rose 5.1 percent.

Fourth-quarter GDP growth, which recorded the slowest pace since the second quarter of 2009, had been forecast at 2.7 percent, a Reuters poll of economists showed.

The bureau revised third-quarter GDP growth to 2.8 percent from 2.9 percent.

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