Many tourists are afraid of going to Israel because of the violence
The country's economy contracted during the first half of 2001 as tourist revenues fell.
Israel's gross domestic product (GDP) fell 0.6% compared with the same period last year, according to official figures.
The Palestinian economy has also been badly affected, with many workers prevented from reaching their jobs, unemployment rising and household incomes falling sharply.
The contraction in the Israeli economy followed a 3.6% rise in GDP during the second half of 2000, the Central Bureau of Statistics (CBS) said.
However, Israel's GDP growth started declining during October last year when the latest uprising started.
By the second quarter of this year, GDP registered a decline of 0.9% year-on-year.
Falling exports
In addition to a slump in tourism, there was a dip in exports, in particular of hi-tech goods for which demand has fallen in line with spreading gloom in the world economy.
Export earnings fell 26.5% during the first half of this year, a sharp turnaround from the previous half's 13.6% rise.
The sharpest fall was seen during the second quarter of 2001 when exports fell 38% compared with an 11.5% decline during the first quarter.
The construction and agriculture sectors have also suffered this year, the CBS said.
Weaker on the High Street
Public spending remained strong in Israel during the first six months of this year, increasing 3.3%, up from the previous half's 2.3%.
But the increase was due to more money being spent on military and security forces.
In the High Street, spending growth slowed dramatically.
During the first half of last year, private spending rose 8%.
This rate had fallen to 6.1% by the following half and to 4.1% by the first half of this year.
Job seekers hit record high
Most of the growth in spending this year occurred during the first quarter with a slowdown to just 0.1% spending growth during the second quarter.
Healthcare, education and energy spending boosted the growth figure, as did spending on food, drinks and clothes.
Earlier this week, the Israeli unemployment department said the number of job seekers had in July reached a record high, rising 3.7% month-on-month to 186,000.
Numbers of job seekers have increased each month since the third quarter of last year.
Palestinian households woe
The Palestinian Central Bureau of Statistics has said its latest survey suggested 14.2% of households in Palestinian self-rule areas had lost all their income since the uprising began while 47.4% of households had lost more than half of it.
The survey, conducted in May and June, also suggested median monthly income had almost halved from the time the uprising started.