ECONOMIC SURVEY - 12-Jan-95

(COMMUNICATED BY GPO ECONOMICS DESK) Jerusalem, 12 January 1995

GOVERNMENT SECTOR:

* FINANCE MINISTRY PLANS TO CHANGE TAX STRUCTURE AND CUT NIS 720 MILLION FROM THE GOVERNMENT'S BUDGET. MINISTRY ALSO SIGNS AGREEMENT WITH HISTADRUT LABOR FEDERATION ON DUES AND FEE LEVELS.
Finance Minister Avraham Shohat announced yesterday (11.1.95) that the Government intends to reduce the tax burden of the middle- and lower- classes by reducing the employees health tax from 4.95% to 1.95% of salary and increasing tax benefits for working women by one point. According to Shohat, this will provide 90 percent of salaried workers a net increase in their salaries and families in the lower- and middle-classes will have their tax burden reduced by approximately 5% in 1995. The Finance Minister said that citizens with incomes of NIS 13,500 per month and over will be the only ones to be taxed more heavily.

Shohat stated that the changes in the tax structure were intended to improve the profitability of the private sector and were in place of a currency devaluation. In order not to increase the Government's deficit the total cost of the new provisions is expected to be NIS 860 million Shohat said that the Government was going to cut spending by NIS 720 million and use NIS 140 million in dividends from Government-Owned Companies. Shohat, who presented the plan to Labor Party Ministers prior to the public announcement, reported he will bring the proposals to the Cabinet at its meeting on Sunday, 15.1.95.

Earlier, on 11.1.95, Shohat signed an agreement with the leaders of the Histadrut Labor Federation setting membership dues at 0.9% of the monthly salary. For those who are not members of the union, an administrative fee of 0.7% will be received from the worker's union. The new levels will affect approximately 250,000 workers in the public sector who are not members of other general unions or recognized professional unions like the teachers or doctors unions.
Finance Ministry - Eli Yosef, (02)-317201

MACRO-ECONOMIC SECTOR:

* BANK OF ISRAEL SURVEY: LOCAL FIRMS REPORT CONTINUED ECONOMIC EXPANSION IN FOURTH QUARTER OF 1994.
The Bank of Israel reported in its quarterly survey of economic activity that local companies reported economic expansion in the fourth quarter of last year compared to 1994's third quarter. In the survey of 650 companies in various sectors of the economy, the Bank reported that building starts were up, and the construction sector showed the greatest growth during the quarter. The transportation and communication sectors also showed growth during the quarter. Industrial firms reported their growth was due to export sales rather to increased local sales; with the electronics, chemicals and plastics, and textiles and clothing sub-sectors showing the largest growth.
Bank of Israel - Ohad Bar-Efrat, (02)-552712

* 22% INCREASE IN 1994'S TRADE DEFICIT; EXPORTS UP 13%; IMPORTS UP 16%.
The Central Bureau of Statistics reports that 1994's trade deficit expanded by 22% to $7.5 billion, compared to $6.1 billion in 1993. Imports rose by 15% reaching $23.4 billion during 1994, while exports increased by 13% reaching $15.9 billion. One-third of the increase in imports came from an increase in machine, equipment, and transportation vehicles including planes and ships, one-half from import of production inputs (excluding diamonds and fuel), while 20% came from consumer goods imports. There was a general increase in exports in all sectors, compared to 1993 when only the chemical, electronics, and machinery sectors increased. In 1994, these three sectors accounted for three-fourths of the rise in exports. Geographically, one-fourth of the increase in exports were to the Far East and Asia, about one-fifth to the United States, and just under one-fifth to the European Union. In 1993, exports to the EU fell.
Central Bureau of Statistics - David Neumann, (02)-553400

TRANSPORTATION:

* WORK ON TEL AVIV SUBURBAN RAILWAY SYSTEM TO BEGIN IN 1995.
Work on the Tel Aviv area suburban railway system will begin in 1995, according to the Transportation Ministry. Transportation Minister Israel Kessar told the Ports and Railway Authority that he intended to work for beginning work as early as possible in order to ameliorate growing transportation problems in the Tel Aviv Region. Shoresh Lehrer, Director- General of the Ports and Railway Authority, noted that only statutory land problems were now standing in the way of building the needed transportation facilities. Kessar said he would solve the statutory land problems one by one with the appropriate local authorities.
Transportation Ministry - Eli Dannon, (02)-31960/2/4

PEACE ECONOMY: