Israel's recession deepened in 2002 due mainly to a 28-month-old Palestinian uprising against the Israeli occupation of the West Bank and Gaza.

Israel's economic output, or GDP, declined by 1.1% last year, the Central Bureau of Statistics said.

Consumer spending fell in 2002

The figure, worse than analysts had expected, followed a 0.9% output drop in 2001.

The decline came amid a significant drop-off in consumer spending, bureau statistics showed,

Foreign investment plunged to 2.6bn shekels last year, from 4.2bn shekels (�540.1m; $865m) in 2001, separate figures showed, while the global economic downturn has hit the country's key hi-tech industry.

And, with the Palestinian uprising adding to Israel's cocktail of woes, analysts have predicted a further economic contraction this year.

Budget crisis

Israeli Prime Minister Ariel Sharon is currently trying to hammer out an austerity budget to cut 10-14bn shekels ($2.05bn - $2.8bn) from the budget to meet a budget deficit target of 3% of GDP.

The recession has severely cut tax revenues, while defence spending continues to soar, leaving only about 5% of the budget invested in the economy.

Bank of Israel governor David Klein warned last week the government risked losing control of the economy unless it addressed the budget deficit.

An Israeli delegation is also due to arrive in the US to plead for an extra $12bn in aid and loan guarantees from Washington.

Israel currently receives about $3bn a year from the US.