After a period in which experts predicted that Israel would be unaffected by the international financial crisis, Bank of Israel chiefs have said that the country also faces an economic turndown.

Deputy bank governor Zvi Eckstein predicted that the Israeli economy — which grew in 2007 by 5.3 per cent — might grow this year by only two per cent.

In recent weeks the bank has bought hundreds of millions of dollars in an effort to curb the collapse of the US currency against the shekel, which has been damaging Israel’s ability to export. The bank also slashed interest rates to 3.25 per cent, the lowest ever.

Despite the warnings, Bank of Israel Governor Professor Stanley Fischer said that most economic indicators were still positive for Israel and that the interventions of banks had helped.