ECONOMIC SURVEY - 18-Dec-96

18 December 1996

(COMMUNICATED BY GPO ECONOMICS DESK)

GOVERNMENT SECTOR:

* GOVERNMENT SETS 1997 INFLATION TARGET OF 7-10%.
In a meeting held on 17.12.96 between Prime Minister Netanyahu, Finance Minister Meridor and Bank of Israel Governor Frenkel, it was decided to adopt a multi-year anti-inflation strategy to reach an inflation level in line with European industrialized countries by the year 2001 (a level of approximately 3% according to Frenkel [Israel Radio, 18.12.96]). In 1997, the inflation target set by the government will be 7-10%. During the meeting, it was decided that the 1998 inflation goals would be set by the middle of 1997, before discussions on the budget, in order to establish a framework for the discussions.
Prime Minister's Office - Shai Bazak, 972-2-6705465

* GOVERNMENT CHANGES PRIORITIES IN ENCOURAGEMENT OF CAPITAL INVESTMENTS.
In a move to supplement the country's capital investment incentives package, the Prime Minister, the Industry and Trade Minister and the Finance Minister on 17.12.96 announced a new set of priorities for investments in Israel's development towns. The four major aspects of the plan for the towns in Development Region "A" include: changing the taxation package for new investments (a seven-year tax break package with the first two years as a tax holiday); setting aside NIS 100 million for worker retraining; increasing the international marketing fund to NIS 170 million from NIS 70 million; and creating an NIS 100 million fund for dealing with specific problems on a local level. Prime Minister Netanyahu said that the changes are being implemented in order to overhaul the current incentives packages to also include incentives for human capital. Finance Ministry - Eli Yosef, 972-2-5317201

MACRO-ECONOMIC SECTOR:

* CPI RISES BY 0.6% IN NOVEMBER.
Israel's inflation rate rose by 0.6% during November, bringing the inflation rate of the first eleven months of the year to 9.7%, the Central Bureau of Statistics announced. During the month, the fruits and vegetables index fell by 1.4%, while the food index (excluding fruits and vegetables) rose by 0.4%. Other indices which rose during the month included housing by 1%; apartment maintenance by 0.6%; clothing and shoes by 3.9%; and health costs by 0.9%.
Central Bureau of Statistics - David Neumann, 972-2-6553400

* MONEY SUPPLY EXPANDS IN NOVEMBER.
The money supply (M1) increased by 0.4% during November, the Bank of Israel announced. This follows a decrease of 1.5% recorded in October and an increase in September of 1.5%. Since the beginning of 1996, the M1 rate has risen by 9.4%.
Bank of Israel - Ohad Bar-Efrat, 972-2-6552712

* FOREIGN INVESTORS HELD 11.3% OF SHARES ON TEL AVIV STOCK EXCHANGE IN SEPTEMBER.
Foreign investors held 11.3% of shares traded on the Tel Aviv Stock Exchange at the end of September, compared to 10.3% during the same month in 1995, the Bank of Israel's Monetary Department reported. At the end of August, the rate was 11.1% and at the end of July it was 11.2%. Foreign investors held 0.3% of the bonds traded on the market at the end of September 1996, the same amount as at the end of September 1995.
Bank of Israel - Ohad Bar-Efrat, 972-2-6552712

FOREIGN TRADE;

* FOREIGN MINISTRY: EVERY DOLLAR SPENT BY MASHAV (CENTER FOR INTERNATIONAL DEVELOPMENT) RESULTS IN SIX DOLLARS OF ADDED EXPORTS.
For every dollar spent on MASHAV (Center for International Development) by the Foreign Ministry, Israeli exporters increase their exports by six dollars, said Haim Divon, head of the MASHAV division. In a report to Foreign Ministry Director-General Eitan Ben-Tzur, Divon stated that in 1996 MASHAV, which operates in 140 countries, trained 3,700 participants in 130 courses. Of these participants, approximately 1,000 came from the Arab world including Egypt, Morocco, Mauritania, Jordan and the Palestinian Authority.
Foreign Ministry - Jill Reinach, 972-2-5303388/9

TOURISM SECTOR: