ECONOMIC SURVEY - 13-May-98

May 13, 1998

(COMMUNICATED BY GPO ECONOMICS DESK)

MACRO-ECONOMIC NEWS:

* BANK OF ISRAEL SURVEY: ECONOMIC SLOWDOWN BEGAN EIGHT QUARTERS AGO
Israel's economic slowdown began two years ago, in the first quarter of 1996, the Bank of Israel reported. The bank found that a number of variables were responsible for the drop in economic activities, including: the East Asian currency crisis; the increase in the tax burden; the increase in wages and the minimum wage; the dearth of workers in the high tech sector; the drop in public sector infrastructure investments; uncertainty in the political and security spheres such as the events in Iraq which hurt, among others, incoming tourism. The bank said that inflation expectations have fallen during the period allowing the bank to reduce interest rates.
(www.bankisrael.gov.il)
Bank of Israel - Gabi Fishman, 972-2-6552712

* SMALL ENTERPRISES ADDED 50,000 NEW JOBS DURING RECESSION OF 1991-93
Small enterprises added approximately 50,000 new jobs during the recession of 1991-93, according to Industry and Trade Ministry Sharansky. Sharansky said that the small and medium sized business sectors represent one of the best and quickest ways to offset the current economic slowdown and unemployment. From 1983- 1991, small enterprises of up to 50 workers, added 250,000 places of work.
(www.tamas.gov.il)
Industry and Trade Ministry - Haya Peri, 972-2-6220340

* EXPORT GROWTH INCREASES DURING FIRST THIRD OF 1998
Israel's exports grew at an annual rate of 13% during the first third of 1998, compared to an annual growth rate of 7% during the last third of 1997, the Central Bureau of Statistics reported. During the first four months of 1998, the balance of trade deficit fell by an annual rate of 21%, compared to an annual rate of increase of 8% during the second half of 1997. During the first third of 1998, industrial exports rose at an annual rate of 14% (comprising 76% of all commercial exports); agricultural exports fell by 4% (comprising 4% of all commercial exports) and diamond exports fell by 13% (comprising 20% of all commercial exports). The European Union received 35%, the United States 27% and South East Asia 11% of all exports during the period.
(www.cbs.gov.il)
Central Bureau of Statistics - David Neumann, 972-2-6553400

* ECONOMIC GROWTH IN 1998 TO BE LESS THAN 2%
Israel's Gross Domestic Product (GDP) will increase by less than 1.9% (the rate in 1997) in 1998, and unemployment will be higher in 1998 than in 1997 (7.7%), according to an updated analysis by the Finance Ministry. The ministry found that exogenous factors such as the crisis in South East Asia will likely not allow the government's economic policies to dictate increased growth in 1998. The ministry said that government's policies of reducing its intervention in the economy, changing the tax rules, liberalizing foreign exchange regulations and allowing more imports are braking the slowdown and increasing the pace of economic growth.
(www.mof.gov.il)
Finance Ministry - Eli Yosef, 972-2-5317201

GOVERNMENT SECTOR:

* CABINET PASSES FINANCE MINISTRY'S NIS 1 BILLION GROWTH ENCOURAGEMENT PLAN
Following a long cabinet debate, the Cabinet on 12.5.98 passed Finance Ministry plans to fight unemployment by spending NIS 1 billion without overreaching the budget. Projects include quickening the pace of transportation, water and sewage and fuel sector infrastructures plans

(both budgeted and off-budget), and increase spending in urban renewal neighborhoods.
(www.mof.gov.il)
Finance Ministry - Eli Yosef, 972-2-5317201

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