Israel’s economy unexpectedly shrank an annualized 1.6% in the first quarter, amid worldwide inflationary pressures that are broadly lowering expansion forecasts.

In Israel, exports and spending on private consumption both fell in the first three months of 2022, disappointing economists who had predicted a 2.3% rise in GDP in a Bloomberg survey. Just one of eight analysts forecast a contraction.

2021 was a bumper year for Israel’s economy, which bounced back from the pandemic to grow 8.1%, fueled by a boom in investment in the country’s high-tech industries.

But Russia’s war on Ukraine and the sanctions imposed in response have darkened the outlook for the global economy by sending energy prices surging and straining supply chains that were already reeling from the pandemic.

The tech-heavy Nasdaq index has seen large recent declines, which has had a knock-on effect on Israel, since many of its technology firms are listed in the US.

Bank Hapoalim Ltd. chief economist Victor Bahar said the magnitude of the Israeli contraction had been a surprise but didn’t see it heralding further falls.

“We don’t think we are entering a period of a recession, but it is a sign that the economy is cooling down,” he said, adding the fall in private consumption was due to a combination of inflation and the return of foreign travel.