ECONOMIC SURVEY - 18-Jan-98

January 18, 1998

(COMMUNICATED BY GPO ECONOMICS DESK)

GOVERNMENT SECTOR:

* ISRAEL TO RAISE $3 BILLION IN FOREIGN CURRENCY IN 1998
Israel is planning to raise $3 billion in foreign currency during 1998, according to the Finance Ministry's Accountant General. During the coming year, Israel plans to offer, for the first time, long term (30 year) bonds on the U.S. capital markets without outside guarantors. A break down of the $3 billion: Israel Bonds will raise $800 million, U.S. loan guarantees $1.44 billion, Yankee Bonds $200 million, banking syndicates $150 million and other sources $50 million. The remaining $350 million will be raised by adding to any of the above sources, excluding the Israel Bonds, the Accountant General said. During 1997, the country fulfilled its aim of penetrating into new markets with successful offerings of Eurobonds, Samurai Bonds (Japan) and Yankee Bonds (United States).
Finance Ministry - Eli Yosef, 972-2-5317201

MACRO-ECONOMIC SECTOR:

* INFLATION RATE IS 7% IN 1997
Israel's inflation rate in 1997 was 7% during 1997, according to the Central Bureau of Statistics. During December, the CPI fell by 0.3%, as did the index in November. During the last month of 1997, although the food index (excluding fruits and vegetables) rose by 0.1%, the fruit and vegetables index fell by 2.5%; the apartment index by 0.4%; the furniture index by 0.2%; the clothing and footwear index by 2.6%, and the transportation and communications index by 0.1%. However, the health index rose by 0.4%, and the apartment maintenance index by 0.2%.
Central Bureau of Statistics - David Neumann, 972-2-6553400

* BANK OF ISRAEL SURVEY: SLIGHT DECLINE IN ECONOMIC ACTIVITY DURING FIRST QUARTER OF 1998
During the first quarter of 1998, economic activity is forecast to be relatively stable with a slight decline, according to the Bank of Israel's quarterly survey of the private sector. The survey found that the industrial, commercial, communications and transportation sectors report stable economic activity, while the construction and hotel industries report that their activities will fall during the period. While exports are expected to rise for industrial firms, their local sales will fall for the second straight quarter. Firms in the construction sector report that they expect a further fall in activity, for the fourth quarter in a row.
Bank of Israel - Gabi Fishman, 972-2-6552712

* INDUSTRIAL EXPORTS RISE BY 8.2% IN 1997.
Israel's industrial exports rose by 8.2% to $18.57 billion, the Industry and Trade Ministry reported. Excluding diamond exports which rose by 2.3% to $4.18 billion in 1997, industrial exports rose by 10.1% to $14.39 billion. Exports to the U.S. Israel's largest export market increased by 14%, followed by Britain. Exports to the Netherlands Italy, Switzerland and Ireland all rose in 1997, compared to the year before. Against this, exports to Germany, France, Belgium, Russia and Denmark all declined. Exports to Asia were marked by decreases of 15% to Japan, 26% to Thailand and 36% to the Philippines, while exports to South Korea and Hong Kong increased. During 1997, communications and medical equipment sector exports rose by 23% or $634 million and the chemicals and fuels sector exports rose by 13% or $333 million.
Industry and Trade Ministry - Haya Peri, 972-2-6220340

PEACE ECONOMICS:

*ISRAELI-PALESTINIAN JOB FAIR SUCCESSFUL
A joint Israeli-Palestinian job fair for Palestinians which took place in Erez on 6-7.1.98, has already found work for 220 workers (40%) of the 570 who attended the fair. 20 Israeli firms from the construction industry participated in the event.
Coordinator of Government Activities in Territories Spokesman - Shlomo Dror, 972-3-6975351

*FINANCE MINISTRY UNIFIES ALL PALESTINIAN AUTHORITY BANK ACCOUNTS RECEIVING FUNDS FROM ISRAEL.
The Finance Ministry announced that it has concluded the unification process of all Palestinian Authority's bank accounts receiving funds from the State of Israel. This process was undertaken in order to improve transparency for the transfer of VAT refunds, import duties, health fund payments, fuel charges and income tax payments. Until now, the Palestinian Authority used five accounts in different banks in order to receive payments. At this point in time, only fuel charges will remain in a separate account, though Israel has asked the Palestinian officials responsible for finances to accelerate the procedure for also including this in the single bank account.
Finance Ministry - Eli Yosef, 972-2-5317201

FOREIGN TRADE;

* EXPORTS EXPECTED TO RISE BY ONLY 5% IN 1998 DUE TO SOUTH EAST ASIAN CRISIS.
Israeli exports are expected to rise by only 5% during 1998, as compared to an increase of 13% in 1997, due to the ongoing economic crisis in Asia, according to the Israel Manufacturers Association. Basing itself on a study by Prof. Assaf Rosen, the association reported that a cutback in consumption in Asia, an increase in the competitiveness of Asian exports to Europe and North America, and greater competition with Israeli products in these markets, will hurt Israeli exports and thus increase pressure on the local employment situation.
Israel Manufacturers Association - Danny Laish, 972-3-5198755