Israelis, Stunned by Record Inflation, Fear Situation Will Worsen

The cost-of-living index rose by 21.2 percent during October, the highest monthly increase since the establishment of Israel in 1948.

The Central Bureau of Statistics, which released the figures today, forecast a similar increase during November, which would amount to an annual inflation rate of 180 percent this year.

Histadrut Director General Yeruham Meshel and leaders of industry expressed shock and surprise at the unprecedented rise, higher than even the most pessimistic economists had been forecasting up to this morning, before the official announcement.

Meshel said Histadrut would demand that an interim cost-of-living increment be paid on November salaries on December 1, in advance of the next regular increase due with January salaries. The COL increase payment then is expected to be in the vicinity of 40-50 percent.

REASONS FOR THE INFLATIONARY SPIRAL

The 21.2 percent increase was due largely to sudden price hikes at the beginning of October, followed by a reduction of government subsidies for essential foodstuffs and services and the 23 percent devaluation of the Shekel. Many food items rose in price by 75 percent during October. The 40-50 percent price hike for foods and services which hit consumers last week will contribute to the equally high inflation rate predicted for November.

Even in advance of today’s announcement, many firms and institutions were talking of impending catastrophe. University heads said they may have to close down institutions of higher learning next month because of cash shortages. Some hospitals said they would have to close wards if the government did not supply cash for supplies and salaries immediately. The director of a Tiberias hospital said anyone who broke a leg next week would have to limp to the hospital, and bring his own bread, bandages and headache pills. “We won’t have any to give him or her, “he said.

“GERMAN CATASTROPHE” FORECAST

The Ata textile complex, which employs some 6,000 workers in the Haifa and the Galilee regions, said it may be forced to close next month because of delays in government aid. Management spokesmen said there was no cash available to pay bus companies hired to transport workers, or raw cotton and yam supplies because of outstanding debts, and no money to meet the payroll.

The anticipated 180 percent inflation for 1983 is double the rate forecast of former Finance Minister Yoran Aridor who had claimed that his “correct economic policy” would reduce inflation to below 100 percent. Now, for the first time, economic reporters are beginning to talk of “hyperinflation on the lines of the German catastrophe of the 1920s.”

A sign of the times is the issuance later this week of a new 1,000 Shekel banknote, bearing the picture of the Rambam. The largest banknote at present is the 500-Shekel denomination. Bank of Israel sources disclosed that a 2,000-Shekel note has been prepared for circulation.

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