ECONOMIC SURVEY - 22-Apr-98

April 22, 1998

(COMMUNICATED BY GPO ECONOMICS DESK)

MACRO-ECONOMIC SECTOR:

* INFLATION RATE IN MARCH FELL BY 0.2%.
Israel's Consumer Price Index fell by 0.2% during March, bringing the inflation rate for the first three months of 1998 to 0.1%, the Central Bureau of Statistics reported. During March, fruit and vegetable prices fell by 0.5%, while food prices (without fruit and vegetables) rose by 0.2%. Prices also fell for apartment's by 0.5%, for apartment maintenance by 0.5% and for clothing and footwear by 2.8%. On the other hand, transportation and communications prices rose by 0.2%, health costs rose by 0.4% and furniture prices by 0.4%.
Central Bureau of Statistics - David Neumann, 972-2-6553400

* INDUSTRIAL EXPORTS INCREASE DURING FIRST QUARTER OF 1998
Israel's industrial exports (excluding diamonds, ships and aircraft) rose by just under 5% to reach $4.04 billion during the first quarter of 1998, the Central Bureau of Statistics reported. On the other hand, industrial imports fell by 0.7% to $5.46 billion, during the first quarter of the year compared to the same period in 1997. Industrial exports to the EU, the US and Canada rose during the first quarter while exports to Asia and Africa fell. Industrial imports fell from the EU, the US and Canada, while rising from the rest of Europe, Asia and Africa.
Central Bureau of Statistics - David Neumann, 972-2-6553400

* BANK OF ISRAEL SURVEY: SLOWDOWN IN CONSTRUCTION, HOTEL, COMMUNICATIONS AND TRANSPORTATION SECTORS
During the first quarter of 1998, the construction, hotel, communications and transportation sectors reported a slowdown in their activities, according to the Bank of Israel's quarterly economic survey. On the other hand, the industrial and commercial sectors of the economy showed stable economic activities. The bank noted that the economy is beginning to feel the affects of the Asian currency crisis. The industrial sector reported that local sales are down while export sales have remained stable. They reported that they expect this trend to continue during the second quarter as well. The companies surveyed also reported that they are projecting an inflation rate of 6.7% for the next twelve months.
Bank of Israel - Gabi Fishman, 972-2-6552712

* MONEY SUPPLY INCREASES BY 1% IN MARCH
In March, Israel's money supply (M1) rose by 1%, following a decrease of 0.7% in February and an increase of 0.4% in January 1998, the Bank of Israel reported. Over the past twelve months, ending March 1998, Israel's M1 supply rose by 10.2%, the central bank said.
Bank of Israel - Gabi Fishman, 972-2-6552712

GOVERNMENT SECTOR:

* MORE FOREIGN CURRENCY LIBERALIZATIONS BY BANK OF ISRAEL
The Bank of Israel has announced an further round of foreign currency liberalization acts including permission for foreign residents to undertake unlimited shekel/foreign currency futures deals, local banks to make unlimited purchases of shekels from foreign banks and greater freedom for Israeli citizens to pay wages to foreigners in foreign currency. These liberalizations will come into affect on 1 May, 1998. These foreign currency liberalizations are part of the central bank's plan, announced in August 1997, to make the New Israel Shekel fully convertible during 1998.
Bank of Israel - Gabi Fishman, 972-2-6552712

* THIRD CELLULAR TELEPHONE OPERATOR PRESENTS NIS 1.4 BILLION CHECK TO GOVERNMENT
Partner, the consortium which will operate Israel's third cellular telephone system, presented the government with a check for NIS 1.4 billion (more than $390 million) at a ceremony on 8 April, 1998 during which it received its license. The consortium consists of Hutchison from Hong Kong (57.5%), Matav (25%) led by the Dankner family, and Elbitcom

(17.5%) of the Elron group of companies. Partner is expected to begin operations during the second half of 1998 and will invest approximately $600 million in the necessary infrastructure for its operations. Israeli cell phone users average close to 500 minutes per month of air time, 4-5 times more than users anywhere else, according to the Communications Ministry.
Communications Ministry - Ayala Bar, 972-2-6706323

FOREIGN TRADE:

* ISRAEL AND MEXICO DISCUSSION FREE TRADE AREA AGREEMENT
Israel and Mexico are conducting discussions this week in order to advance negotiations on a free trade area agreement, the Ministry of Industry and Trade announced. Exports to Mexico reached $73 million in 1997 against $7 million in imports. During the first quarter of 1998, exports to Mexico were up by 22% and imports by 51%, compared to the same period in 1997.
Industry and Trade Ministry - Haya Peri, 972-2-6220340