ECONOMIC SURVEY - 11-Dec-96

(COMMUNICATED BY GPO ECONOMICS DESK) December 11, 1996

GOVERNMENT SECTOR:

* CABINET APPROVES ADDITIONAL 1997 BUDGET CUTS OF NIS 1.8 BILLION.
On 09.12.96, the Cabinet approved an additional cut of NIS 1.8 billion to the 1997 budget. The vote was 14 pro, 4 con (Foreign Minister Levy, Tourism Minister Katzav, Interior Minister Suissa, and Labor and Social Welfare Minister Yishai). The new program is based on cuts of NIS 1.2 billion and an increase in revenues of NIS 600 million with each government ministry participating. Four categories were established for the cuts. The security category cut 0.5%: defense, public security, and secret services; the social category cut 1.3%: health, labor and social welfare, higher education, absorption, and religous affairs; the economic category cut 3%: industry and trade, transportation, national infrastructure, science, tourism, interior, agriculture, and housing; and the administrative category cut 5%: Prime Minister's office, foreign, environment, justice, finance, and communications. The education ministry, nominally part of the social category will have cuts of 0.65% (one-half of 1.3%). These cuts are in addition to NIS 4.9 billion in cuts approved by the Cabinet during the Summer. Both cuts have to be approved by the Knesset.
Finance Ministry - Eli Yosef, 972-2-5317201

* COMMUNICATIONS SECTOR REFORMS RECEIVE SUPPORT OF MINISTERS.
Israel will open its communications sector to competition no later than January 1999, and preferably before the end of 1998, according to the recommendations of the Wachs-Brodet-Leon Committee adopted by Communications Minister Limor Livnat and Finance Minister Dan Meridor. The sector's structural reforms will include opening the domestic telephone, transmission, and infrastructure sectors to competition. The committee was co-chaired by Communications Ministry Director-General Shlomo Wachs, Finance Ministry Director-General David Brodet, and Senior Deputy Director- General in the Prime Minister's Office Moshe Leon. Leon said that these reforms will be followed by reforms in the energy, fuel, and transportation sectors.
Communications Ministry - Ayala Bar, 972-2-6706323

* $200 MILLION SUCCESSFULLY RAISED ON EUROBONDS MARKET.
Israel successfully raised $200 million on the Eurobond market on 05.12.96 by selling five-year bonds at an interest rate of 6.368%, which is only 0.5% above U.S. Treasury bonds for the same period. Approximately one- third of the institutional investors purchasing the bonds were from the Far East, and in particular, from Japan. This was partially a result of a special trip Finance Ministry officials made to the Far East before the offering. Although the offering was oversubscribed, the Treasury did not increase the amount offered. The offering is intended to serve as a basis for Israel's international financial offerings following the completion of loans taken with U.S. guarantees in 1988.
Finance Ministry - Eli Yosef, 972-2-5317201

* ISRAEL AND SINGAPORE SIGN RESEARCH & DEVELOPMENT AGREEMENT.
Industry and Trade Ministry Director-General Shuki Gleitman signed an agreement to establish a fund to finance joint R&D projects between companies from Israel and Singapore, in Singapore on 10.12.96. The agreement follows close to two years of talks between the two countries and will contribute to enhancing trade ties between the two countries Gleitman said. Gleitman is also in Singapore for the meeting of the World Trade Organization.
Industry and Trade Ministry - Haya Peri, 972-2-6220340

MACRO-ECONOMIC NEWS:

* NOVEMBER'S TRADE DEFICIT IS $526 MILLION, LOWEST IN 15 MONTHS.
Israel's trade deficit in November was $526 million, the lowest recorded in 15 months (Sept. 95), the Central Bureau of Statistics reported. The trade deficit rose by 4.3% from the beginning of 1996 to reach $9.56 billion. During November, exports were $1.7 billion ($1.16 billion excluding seasonal factors, planes, ships, and diamonds), and imports were $2.24 billion ($1.93 billion excluding seasonal factors, fuel, planes, ships, and diamonds).
Central Bureau of Statistics - David Neumann, 972-2-6553400

* GROSS DOMESTIC PRODUCT GROWS BY 3% IN THIRD QUARTER.
Israel Gross Domestic Product grew by 3% in the third quarter, as compared to 2% during the second quarter and 6% during the first quarter of the year, the Central Bureau of Statistics reported. Imports of goods and services rose at annual rate of 17% during the third quarter and the resources able to be used by the economy (the GDP plus imports) rose by 8% during the third quarter, as compared to only 1% in the second quarter and 2% during the first quarter of the year. Investments in fixed assets

(excluding planes and ships) rose by an annual rate of 16% during the third quarter, as compared to an increase of 5% in the second quarter and 17% during the first quarter.
Central Bureau of Statistics - David Neumann, 972-2-6553400

FOREIGN TRADE: