ECONOMIC SURVEY - 01-Jun-95

1 JUNE 1995

(COMMUNICATED BY GPO ECONOMICS DESK)

PRIVATIZATION:

* TRANSPORTATION MINISTER KESSAR: A PRIVATIZED EL AL WILL NOT FLY ON THE SABBATH.
Transportation Minister Israel Kessar declared that El Al would not fly on the Sabbath even after privatization. Kessar said this on 24.05.95, in response to El Al's new Chairman of the Board, Joseph Ciechanover, who reported, in New York, that the airline could fly on Sabbath after 51% of its shares were out of the hands of the Government. Currently, the Government has prohibited the national airline from flying on the Sabbath. Ciechanover also said it is quite possible that El Al's initial public offering in the U.S. would occur before its IPO in Tel Aviv, both of which were postponed due to low appraisals and the current poor situation [as termed by the Finance Ministry] for the offerings of foreign companies.
Transportation Ministry - Eli Dannon, 972-2-319690/2/4

MACRO-ECONOMIC NEWS:

* FIRST QUARTER STATISTICS POINT TO 5-6% ANNUAL RISE IN GROSS DOMESTIC PRODUCT.
A growth of 5.5% in the GDP, at an annual rate, was recorded during the first quarter of 1995, according to statistics reported by the Central Bureau of Statistics. This follows growth in the GDP during the second half of 1994 of 3% and during the first half of 1994 of 4%. The business sector's GDP rose at an annual rate 7.4%, compared to the second half of 1994 when it rose 4.1%. During the first quarter of 1995, fixed investments rose by an annual rate of 15.6%, exports of goods and services fell at an annual rate of 15.1%, while imports of goods and services rose at annual rate of 33.1%, private consumption per capita rose at an annual rate of 19.3%, and purchases of durable goods rose at annual rate of 114% per capita.
Central Bureau of Statistics - David Neumann, 972-2-6553400

* CHANGES IN EXCHANGE RATE MID-RANGE, EXCHANGE RATE CURRENCY BAND, AND CURRENCY BASKET ANNOUNCED BY BANK OF ISRAEL AND FINANCE MINISTRY.
On 31.5.95, the Finance Ministry and the Bank of Israel, together, announced that the exchange rate's mid- rate would go up by 0.8% on 1.7.95, while the exchange rate band will be expanded to +7% (from +5%) on 5.6.95. At the same time, the dollar's weight in the currency basket will be increased by 3.2 percentage points to 57.9 percentage points. Finance Ministry Director-General David Brodet said the addition of 2% on each side of the exchange rate mid-rate would allow the Government more flexibility in its responses to currency movements in the floating exchange rate. The increase of 0.8% in the exchange rate mid-rate is to offset changes in tariffs and port and railway levies paid by importers and exporters. Bank of Israel Senior Director Avi Ben-Bassat explained that the adjustment in the dollar's weight in the currency basket was made in accordance with Israel's foreign trade activities during 1994, in which the dollar's use increased 3.2% in relation to the four other currencies in the basket. Both Brodet and Ben-Bassat termed these changes "technical adjustments".
Finance Ministry - Eli Yosef, 972-2-317201
Bank of Israel - Ohad Bar-Efrat, 972-2-552712

FOREIGN TRADE:

* ISRAEL AND FRANCE SIGN INDUSTRIAL R&D AGREEMENT.
Israel and France signed an industrial research and development cooperation and investment agreement on 29.5.95, whose purpose is to fund joint projects. The fund, established with a principle of FF 30 million, was negotiated over a period of two years. Israel's co-Chairman of the fund is Yehuda Bronitzki, president of Ormat Industries.
Industry and Trade Ministry - Avital Ber, 972-2-220340

TRANSPORTATION:

* VEHICLE USAGE UP 11% IN 1994 TO 27.5 BILLION KILOMETERS.
Israeli vehicle usage rose by 11% in 1994 to reach 27.5 billion kilometers, the Central Bureau of Statistics announced. The Bureau reported that this was a result of an increase of 8% in the number of private vehicles on the road, and an increase of 3% in the average amount of kilometers travelled by Israelis. In 1994, the average amount travelled by private cars was 17,200 kilometers, compared to 16,400 kilometers in 1993.
Central Bureau of Statistics - David Neumann, 972-2-6553400

DELEGATIONS:

* INTERNATIONAL MONETARY FUND DELEGATION HERE TO EXAMINE ECONOMY.
The Bank of Israel is hosting an International Monetary Fund delegation through 7.6.95. The IMF group is here to examine the state of the Israeli economy, as it does every year, in order to give it a rating which will be one of the parameters used by the international financial community when lending money to Israel. During its visit, the delegation will meet with officials in the Finance Ministry, Histadrut, Israel' banking and financial community, and academics. After returning to Washington, D.C., the delegation will lead a discussion on the report within the IMF, and then release the report. Bank of Israel - Ohad Bar-Efrat, 972-2-552
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