ECONOMIC SURVEY
9 January 1996
(COMMUNICATED BY GPO ECONOMICS DESK)
GOVERNMENT SECTOR:
* CABINET DECIDES ON NIS 1.3 BILLION BUDGET CUT.
On 7.1.96, the Cabinet, by a vote of 10 to 9, decided to cut NIS 1.3
billion from the States' 1996 Budget. This move came only 10 days after
the Knesset passed the 1996 budget of NIS 172.7 billion. The Finance
Ministry proposed the budget cuts due to worries of not being able to meet
the required budget deficit of 2.5% of the country's GDP in 1996. This is
a result of a number of factors that became more apparent since the
beginning of the year, the Finance Ministry reported: additional spending
increases, lower than anticipated revenues, and large surpluses from the
1995 budget. Despite specific budget cuts per ministry in the Finance
Ministry's original proposal, the Cabinet passed a compromise budget
reduction proposal, proposed by Education Minister Rubinstein, in which
the Finance Ministry will provide the reduction breakdowns at next week's
Cabinet meeting. Along with the proposed budget cuts, the Finance Ministry
authorized an increase of 15.1% in the price of gasoline, effective
midnight, 6.1.96. This move is meant to increase Government revenues by
NIS 750 million in 1996, the Finance Ministry announced.
Finance Ministry - Eli Yosef, 972-2-317201
* CROSS-ISRAEL HIGHWAY CORNERSTONE TO BE LAID.
On 9.1.96, Prime Minister Peres, Finance Minister Shohat, and Construction
and Housing Minister Ben-Eliezer will lay the cornerstone for construction
of the first phase of the Cross-Israel Highway. The first phase will be
approximately 90 kilometers, running north-south, east of the Tel Aviv
metropolitan area. The central portion of the highway, from Hadera to
Gedera, is planned as a toll road and will be built by private contractors
via tenders. The cost of the first major interchange, the Ben Shemen
Interchange (where the ceremony will occur) is estimated at NIS 70
million. The highway will eventually extend approximately 300 kilometers,
from Beersheva to the Galilee.
Construction and Housing Ministry - Ofra Preuss, 972-2-847994
MACRO-ECONOMIC SECTOR:
* INCREASE IN IMPORTS OF DURABLE GOODS IN 1995.
Large increases in the amount of durable goods imported into Israel were
reported during 1995 by the Finance Ministry. Automobile imports rose by
9.4% to 132,019, video recorder imports rose by 29.4% to 104,619, and
refrigerator imports rose by 16.6% to 50,884, compared with 1994. however,
during the year, television imports fell by 7.9% to 283,564 and washing
machine imports fell by 2% to 140,930, the ministry reported.
Finance Ministry - Eli Yosef, 972-2-317201
* REAL INCREASE OF 4.2% IN 1995 NATIONAL TAX REVENUES; TOTAL TAX BURDEN
FELL BY 1.5% TO 40% OF GDP.
1995 national tax revenues increased by 4.2% in real terms, and 14.6%
before inflation, the Finance Ministry reported. Tax revenues came to NIS
84.7 billion in 1995, compared to NIS 73.9 billion in 1994. The national
tax burden, as a percentage of GDP, decreased by 1.5% to 40% of the GDP.
32.5% of this was from taxes by the Treasury, falling from 33.1% in 1994,
while the remaining 7.5% was collected by the National Insurance
Institute. With the new 15.1% tax on gasoline imposed this past Saturday
night, 6.1.96, the tax burden is expected to rise by 0.25%. The amount of
taxes collected from the public in 1995 was NIS 2.4 billion less than the
amount budgeted by the Treasury. Reasons for the decrease include
cancellation of the capital gains tax, the changing of laws, the transfer
of tax monies (NIS 700 million) to the Palestinian Authority, and a
decrease in collecting VAT, income tax, and duties.
Finance Ministry - Eli Yosef, 972-2-317201
DEFENSE SECTOR:
* LOCKHEED MARTIN NEGOTIATING TO ACQUIRE 50% EQUITY IN TAAS ISRAEL
INDUSTRIES' HEAVY AMMUNITION FACTORIES.
American-based Lockheed Martin is negotiating with TAAS Israel Industries
(formerly Israel Military Industries) to acquire a 50% equity interest in
the concern's heavy ammunition factories. According to Globes, a number of
other large international defense firms are talking with TAAS about
becoming a strategic partner for its heavy ammunition plants. TAAS's sales
of heavy ammunition, abroad and locally, are about $200 million annually.
The decision to bring in an international strategic partner to a number of
the concern's activities is part of TAAS's long-term development program
that has been approved by the Government (TAAS Israel Industries is a
Government-owned concern). ("Globes", 3.1.96, p.1)
FOREIGN TRADE:
* EXPORTS TO SWEDEN INCREASE BY 27.7% FOR FIRST NINE MONTHS OF 1995.
Exports to Sweden increased by 27.7% during the first nine months of 1995
to $68 million, yet a large trade gap still remains, the Industry and
Trade Minister reported. The rise in exports was driven by an increase of
65% in electronics and metals sector exports, to $38 million. Imports from
the Scandinavian country rose by 6.4% during the period, to $260 million.
Industry and Trade Ministry - Ayal Fabian, 972-2-220389
* INDUSTRY AND TRADE MINISTER TO LEAD DELEGATION TO SPAIN.
Industry and Trade Minister Micha Harish will lead a business delegation
to Spain on 15.1.96. The purpose of the visit is to mark 10 years of
diplomatic relations and to increase trade links between the two
countries. Exports to Spain rose by 28% for the first nine months of 1995,
to $226 million, while imports from Spain rose by 37%, to $382.6 million,
for the same period.
Industry and Trade Ministry - Ayal Fabian, 972-2-220389