Economic growth slowed to an annualized 3.3 percent in the first quarter as exports dropped, the Central Bureau of Statistics reported Sunday.Growth accelerated an annualized 4.8% in the fourth quarter of 2009, up from 3.6% in the third quarter and 1.2% in the second quarter, after contracting 2.7% in the first quarter.“The crisis in Europe is threatening to put an end to the Israeli exports party of recent months,” Yaniv Hevron, an economist at Excellence Nessuah Investment House, said Sunday. “The problem is that the strong economies in Europe are also expected to fall into a deep economic crisis, damaging growth and hurting demand for goods and services. The continued weakness of the euro against the shekel, which depreciated by 5.5% over the past two months and by 15.6% over the past 12 months, is hurting export profits.”The economy expanded 0.7% in 2009, compared with 4% in 2008 and 5.2% in 2007. In comparison, member economies of the Organization of Economic Cooperation and Development contracted at an average rate of 3.5% in 2009.The Bank of Israel last month raised its growth forecast for 2010 to 3.7% from 3.5%. It expects a decline in the unemployment rate to an average of 7% from the current 7.3%.According to preliminary figures for the first quarter, exports of goods and services dropped 7.3%, down from growth of 47.3% in the previous quarter. Exports of services fell an annualized 36.2%, while industrial exports, not including diamonds, declined 2.7%.Diamond exports rose an annualized 74% and agricultural exports increased 30% in the first quarter.Imports of goods and services rose an annualized 44% in the first quarter, up from 13.6% in the previous quarter. Imports, not including defense, ships, planes and diamonds, rose 21.7%, up from 4.5% in the fourth quarter.Business-sector growth expanded 4.8% in the first quarter, compared with 5% in the fourth quarter and 3.1% in the third quarter of 2009.Consumer spending rose an annualized 1.6%, down from 2.9% in the fourth quarter and 4.1% in the third quarter.Investment in fixed assets, including residential housing, construction and transportation, declined an annualized 0.3% in the first quarter, after contracting 8.5% in the fourth quarter.Investment in residential construction rose an annualized 3.2%, while investment in nonresidential construction surged 53.7%.The Israel Export Institute warned Sunday that recent economic developments in Europe and fears of a debt crisis were strengthening the possibility of a repeat of the financial crisis that began in 2008.“In both best-case and worst-case scenarios, recent economic developments in Europe will hurt the growth of Israeli exports,” Israel Export Institute director-general Avi Hefetz said in a report. “Even under a more optimistic scenario, the majority of euro-zone countries are likely to undertake austerity measures, which in the short term will lead to a slowdown in the recovery of the economies and hence to a slowdown in the demand for goods and services from Israel.”Greece might struggle to meet its debt payments, which at some point could lead it to default and abandon the euro, the report said. That could have a domino effect on financial markets, triggering a European economic crisis and then a global one.“The repercussions of such a scenario on Israeli exports would be severe, resembling the sharp declines in exports in the last quarter of 2008 and the beginning of 2009,” Hefetz said.The Israeli chemicals sector is vulnerable to what happens in Europe, he said. In 2009, the chemicals industry generated about $6 billion in exports, out of which 46% went to euro-zone countries, including 8.2% to Portugal, Ireland, Greece and Spain.