Israel's economy expanded 4.1 percent this year, its slowest pace since 2003, as exports and consumer spending cooled, the Central Bureau of Statistics reported Wednesday.

Exports of goods and services increased 3.6%, down from 8.5% in 2007, while consumer spending growth eased to 3.9% from 6.7%, bureau officials said at a Jerusalem news conference. The economic growth estimate, based on data through November, compares with a 4.5% forecast in October.

"This year, we felt the impact of the global crisis, both in terms of demand for exports, which dropped in the second half, and in demand at home for consumer goods," said Soli Peleg, head of the bureau's macroeconomics division. "Consumers saw the value of their assets fall and cut back purchases."

The Bank of Israel, which forecasts that growth will ease to 1.5% next year, has cut the benchmark interest rate by 2.5 percentage points since October to a record, while the government is planning a stimulus package.

Economic growth slowed to a 1.8% annualized rate in the second half of the year from 4.9% in the first, the bureau said.

"The second half of the year still wasn't recession, just a slowdown," said Vered Dar, an economist at Psagot Investment House Ltd., who expects the bureau to revise this year's growth figure to between 3.5% and 4%.

The economy expanded 5.4% in 2007, marking its fourth year of growth in excess of 5%. Gross domestic product rose 1.8% in 2003 as Israel was climbing out of its deepest recession ever.

Peleg did not comment on the economic impact of the Israeli military assault on the Hamas-ruled Gaza Strip.

Exports account for about 45% of Israeli GDP. The Tel Aviv Stock Exchange's benchmark TA-25 index fell 46% to a three-year low this year.

Imports of goods and services climbed a preliminary 2.9%, easing from 11.7% last year, the bureau said. That helped widen the trade deficit, not counting diamonds and defense equipment, to $1.4 billion from $312 million the year before, the bureau said.

Israel's current-account surplus narrowed to 2.3% of GDP, or $2.7b., from 2.7%, or $5.3b., in 2007, it added. Israel has been running current-account surpluses since 2003.

Compared with countries belonging to the Organization for Economic Cooperation and Development, the club of rich nations Israel is a candidate to join, the economy performed well. Per capita GDP growth was a preliminary 2.2% this year, compared with an OECD average of 0.8%, the bureau said.