TEL AVIV, Israel, Dec. 31 (UPI) -- The Israeli economy contracted 0.5 percent in 2001, making it the worst year for the nation's economy since 1953, according to preliminary figures released Monday by the Central Bureau of Statistics.

The figure is also well below the bureau's October forecast of 0.5 percent growth. The decrease follows a record 6.4 increase in 2000.

Prime Minister Ariel Sharon last month attributed Israel's economic troubles to the slowdown of the global economy and the escalation in Palestinian violence both of which have combined to send the Israeli economy into a recession.

Meanwhile, a drop in state revenues has forced the government to slash its budget, cancel ambitious plan, and led to widespread demonstrations by residents of southern Israel, the Negev, trying to preserve promised incentives.

In an attempt to boost the economy, the Bank of Israel recently lowered interest rates and the value of the dollar has been soaring, thus helping Israeli exports. On Monday the dollar rose to a record NIS 4.416 to a U.S. dollar, compared with NIS 4.335 one week earlier.