ECONOMIC SURVEY - 01-Aug-96

(COMMUNICATED BY GPO ECONOMICS DESK) August 1, 1996

MACRO-ECONOMIC SECTOR:

* INDUSTRIAL PRODUCTION UP BY ANNUAL RATE OF 5.4% IN FIRST HALF OF 1996.
Industrial production rose by an annual rate of 5.4% during the first half of the year, as compared to an annual rate of 8% during the same period in 1995, the Bank of Israel reported. In a report prepared by its research department, the bank said that growing local demands, a lower rate of local supplies, and growing demands pushed prices up and created a surplus of imports into the economy. The bank said that government budget policies influenced the surplus of imported goods, that early elections were a likely cause pushing buyers. to make early purchases of goods, and that security incidents influenced supplies. The bank also reported that at its current pace the government's budget deficit would be NIS 3.7 billion higher than forecasted for 1996. During the first half of the year, the local government deficit was 4% of GDP, as compared to 1.9% for the corresponding period last year.
Bank of Israel - Ohad Bar-Efrat, 972-2-6552712

* FOREIGN CURRENCY RESERVES UP BY $35 MILLION IN JULY.
Israel's foreign currency reserves rose by $35 million in July, the Bank of Israel reported. The increase was mainly due to the public sector, though its actions were partially offset by private sector transfers from abroad.
Bank of Israel - Ohad Bar-Efrat, 972-2-6552712

* ISRAEL'S FOREIGN CURRENCY DEBT RECEIVES A MINUS LONG TERM AND A1 PLUS SHORT TERM FROM STANDARD AND POOR'S.
On 1.8.96, Standard and Poor's affirmed ratings on Israel's foreign currency debt at A- for long term debt and A1+ for short term debt, the Finance Ministry reported. S&P also reported it had assigned Israel's local currency debt (traded on Tel Aviv Stock Exchange) at AA- for long term debt and A1+ for short term debt. Some NIS 116 billion of local currency debt, including NIS 90 billion of inflation indexed bonds, were affected, S&P said. This is the first time S&P assigned ratings to locally traded government bonds, the Finance Ministry reported.
Finance Ministry - Eli Yosef, 972-2-317201

PRIVATE SECTOR:

* BANK LEUMI SIGNS AGREEMENT TO SELL 40% SHARE IN ITS MIGDAL INSURANCE SUBSIDIARY.
Bank Leumi has signed a letter of intent with the large Italian insurance firm Assicurazioni Generali to sell it a 40% share in Migdal Insurance, Israel's largest provider of insurance. Generali is expected to pay approximately NIS 1.2 billion, or $330 million, for the shares, making Migdal's net worth close to NIS 3 billion. Migdal is part of the Africa- Israel Group, which is a subsidiary of Bank Leumi. Bank Leumi must sell shares in its non-financial holdings so that these holdings will equal 25% or less of its total equity, in accordance with new government regulations created in order to diffuse economic concentration by the banking sector.
Bank Leumi - Ricki Carmi, 972-3-5149404

* MEI EDEN TO EXPAND GOLAN FACILITIES WITH $3 MILLION INVESTMENT.
Mei Eden, one of the country's largest mineral water bottlers, reported it was planning to invest $3 million over a two-year period to expand its factory on the Golan Heights. In addition, the company recently announced it would invest $1.5 million to create a marketing network in Poland.
Mei Eden - Ronny Pnai, 972-3-5777970

FOREIGN TRADE:

* ISRAEL AIRCRAFT INDUSTRIES AND MCDONNELL DOUGLAS WIN U.S. AIR FORCE CONTRACT TO UPGRADE T-38 AIRCRAFT.
McDonnell Douglas has been awarded a contract from the U.S. Air Force initially worth $45.6 million with options valued at over $400 million. The U.S. company's major sub-contractor is Israel Aircraft Industries' LAHAV Division. The project is to upgrade avionics and other sub-systems of 425 T-38 training jets, a derivitave of Northrop-Grumman's F-5 jet.
Israel Aircraft Industries - Doron Susslik, 972-3-9358509

* AGAN AND MAKHTESHIM PURCHASE 49% OF SPAIN'S ARAGONESAS AGRO FOR $7 MILLION.
Makhteshim Chemicals and its subsidiary Agan Chemicals announced they have purchased 49% of Spain's Aragonesas Agro for $7 million. The acquisition will allow the two Koor subsidiaries to expand their export efforts to southern France, Spain, Portugal, and Morocco. Aragonesas Agro produces and markets fertilizer. Makhteshim and Agan have committed themselves to acquiring Aragonesas Agro's remaining shares within three years, with a purchase price depending on the company's profits during the period.
Koor Israel - Amiram Fleisher, 972-3-5251115