ECONOMIC SURVEY - 19-Aug-96

(Communicated by GPO Economics Desk)

August 19, 1996

GOVERNMENT SECTOR:

* ISRAEL TO RAISE UP TO $1 BILLION IN NEW YORK THIS WEEK.
Israel will be raising between $750 million and $1 billion (to be determined in accordance with market conditions) this week, through U.S.- guaranteed bonds in New York. In order to carry out the issue, the Finance Ministry Director-General, Accountant-General, and Deputy Accountant- General are traveling to New York. Israel has raised $5.6 billion in U.S.- guaranteed bonds since the U.S. agreed to assist Israel over a five year period ending in 1998 in raising funds on the New York markets. Israel has already raised $750 million during 1996 within this framework.
Finance Ministry - Eli Yosef, 972-2-317201

* ISRAEL'S OUTLOOK IS STABLE ACCORDING TO VISITING STANDARD & POOR'S ANALYSTS.
Last week, a group from the U.S.-based international financial ratings firm Standard & Poor's visited Israel. During their visit, they met with government and Bank of Israel officials. According to their recent report issued on 30.07.96, Israel's outlook is "stable. The Likud government's committment to disciplined fiscal and monetary policies should help lower fiscal imbalances and inflation going forward. Current account deficits, in turn, are expected to remain over 4% of GDP in 1996 and 1997, but should be financed increasingly by foreign equity inflows. The Likud government's cautious approach towards Palestinians and Syria likely will slow, but not reverse, advancements in peace process over the long term. Deep divisions among Israelis, Palestinians, and Syrians, make the peace process suseptible to important setbacks, but not ones likely to seriously jeopardize Israel's security."
Finance Ministry - Eli Yosef, 972-2-317201

* BANK OF ISRAEL PURCHASES NIS 250 MILLION WORTH OF BONDS IN "SAFETY NET" ACTION.
On 19.08.96, the Bank of Israel purchased NIS 250 million worth of government bonds from the banks and members of the Tel Aviv Stock Exchange. The central bank took this action as part of its "safety net" plan to help stabilize the country's capital markets. Though sell orders of NIS 1.7 billion were made to the bank, the bank said that only NIS 560 million of these requests fit its predetermined and published criterion of being at, or below, the market price.
Bank of Israel - Ohad Bar-Efrat, 972-2-6552712

MACRO-ECONOMIC SECTOR:

* INFLATION RISES BY 0.3% IN JULY.
The Consumer Price Index rose by 0.3% during July, the Central Bureau of Statistics reported. While food prices (excluding fruits and vegetables) rose by 1.4%, the price of fruits and vegetables fell by 0.1%, the price of apartments by 0.7%, and the price of clothing and shoes by 3.2%.
Central Bureau of Statistics - David Neumann, 972-2-6553400

* RETAIL CHAIN STORE SALES UP BY 0.5% IN JUNE-JULY.
Retail chain store sales, which constitute approximately 25% of private consumption, rose by 0.5% in June and July, the Central Bureau of Statistics reported. For the first seven months of 1996, retail chain store sales average monthly growth of 0.9%. For food sales in retail chain stores, which constitute approximately 30% of all food sales, June and July had an average monthly sales growth of 0.4%, compared to a growth rate of 1% monthly for the first seven months of the year.
Central Bureau of Statistics - David Neumann, 972-2-6553400

* MONEY SUPPLY INCREASES BY 4.5% DURING JULY.
Israel's money supply (M1) rose by 4.5% during July, as compared to decreases in both May and June, the Bank of Israel reported. Since the beginning of 1996, Israel's M1 has risen by 9.7%. Bank of Israel - Ohad Bar-Efrat, 972-2-6552712

PRIVATE SECTOR:

* CLARIDGE ISRAEL, RENAISSANCE FUND, GEORGE SOROS, AND TED ARISON GROUP DROPS OUT OF BANK HAPOALIM TENDER.
Claridge Israel, which is leading one of the two groups bidding to acquire 20-25% of Bank Hapoalims shares, reported that its group has dropped out of the race to purchase the shares. The group also included the Canadian Bronfman family's Renaissance Fund, investor George Soros, and investor Ted Arison. It was reported that the group left the bidding because the bank's structure which includes non-financial firms as well as banking activities has been changed by new regulations which were not existant when the bidding process began, the bidding process has taken too long, and due to a disagreement over the bank's evaulation. (Ma'ariv, 16.8.96, p. A11)