Israel’s Inflation Under Control, Finance Ministry Aide Says; Cost of Living Drops Again

The inflationary spiral is under control in Israel and the cost of living index has dropped for the second successive three-month period, David Horowitz, director-general of the Israeli Finance Ministry, reported here today.

In an overall review of the Israeli domestic situation and the prospects for its export program, Mr. Horowitz outlined the basis for a new policy to encourage foreign investments, estimated the prospects for a favorable export program and reported on increased domestic production. He also pointed out that the Arab economic boycott of Israel was doomed to failure.

Mr. Horowitz revealed that the cost of living for the quarter ending February, 1949, had dropped three percent and that the index for the period ending May, 1949 had dropped a further 5.4 percent. The wholesale price index also dropped substantially during these periods, the Finance Ministry official added.

Currency in circulation and bank deposits have increased 23.8 percent between September, 1948, and May, 1949, as against a population increase of 27.8 percent during the same period, he said. During the same period 20,000,000 Israeli pounds have been invested in industrial plants and equipment, while Israeli agricultural production rose 17.6 percent.

To attract an influx of foreign capital, he said, the government has authorized the export of a portion of all profits and dividends earned in Israel. It has also exempted imported machinery from customs duty and has made other adjustments, he recalled.

He stated that Israel’s balance of trade at this time is unfavorable, but cited that fact as giving Israel an “enormous” advantage in trade negotiations with foreign nations. Israel’s exports in the near future will be citrus products, polished diamonds and potash products, he said. The Arab boycott must fail, he asserted, because in the past Palestine bought more from the Arab states than it imported. In fact, he declared, the Arab foreign trade amounted to only 11 percent of Palestine’s total–not a decisive percentage.

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