The Organization for Economic Co-operation and Development (OECD) said Monday Israel is on track to avoid recession despite the global economic downturn.

Nevertheless, OECD officials said weakening external demand due to economic crises in other countries has caused a slowdown in output growth that will likely persist until the middle of 2012.

The diminished prospects for output and employment, along with lower inflation expectations and outcomes, have led to an easing of Israel’s monetary policy stance.

The Bank of Israel monetary committee cut the interest rate for December by 25 basis points to 2.75%, after leaving it unchanged for November. It also cut 25 basis points in October. The bank said the rate cut would help mitigate the difficulties that may arise for consumers and businesses during the slowdown.

Most economic analysts expect further cuts in the interest rate to 2-2.25% in the first half of 2012.

Economic observers note, however, that slowed growth is still growth and that Israel’s economy remains strong despite the deep debt crisis in Europe and worsening economic situation in the United States.

According to Globes, the OECD predicts that Israel’s GDP growth rate will slow from 4.7% in 2011 to 2.9% in 2012, and rebound to 3.9% in 2013. Export growth is projected to slow from 4.8% in 2011 to 3.9% in 2012, and partly recover to 7.8% in 2013. Unemployment is expected to rise from 5.6% in 2011 to 6% in 2012, and fall back to 5.8% in 2013.

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