The Bank of Israel predicted 3.5 per cent gross domestic product (GDP) for 2019, as the economy is more inclined to export and less to private consumption.
The economy appeared to be more balanced in the first half of 2018, according to the Bank of Israel report.
The trend was also reflected in the continuing tightening in the labour market during the past two years, in which there was a high level of job vacancies with a low unemployment rate, as well as significant rise in wages.
The lender also predicted that the GDP will grow 3.7 per cent in 2018, reports Xinhua.
For the first time in 10 years, housing prices in Israel decreased in the half-year period, according to the central bank.
The decline stemmed from a drop in demand and an increase in supply, mainly as a result of a governmental programme encouraging the purchase of one's first apartment with preferential terms, especially for young couples.
The report on Sunday also reviewed the five interest rate decisions made during this period, leaving the rate unchanged at 0.1 per cent.
The decisions were made based on the low inflation, the expansionary monetary policy of leading economies, the stability in the shekel exchange rate, the moderation in the housing market, and the improvement in economic activity in Israel and around the world.
During the first half of this year, the bank continued to intervene in the foreign exchange market, the report said.
Annual inflation witnessed a moderate rise to reach 1.3 per cent during this period, hitting the target for the first time in four years.
The effective exchange rate of the shekel fluctuated around a relatively stable level, after it showed stability in the second half of 2017.
Annual inflation is expected to remain within the target range in the second half of 2018 to reach 1.2 per cent at the end of the year and 1.5 per cent in 2019.
The interest rate is expected to remain at 0.1 per cent until the third quarter of 2018, and to rise in the fourth quarter to 0.25 per cent, the report added.