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Israel’s Economic Scene: Trade Deficit Cut by $1 Billion in ’84

Israel succeeded in reducing its trade deficit in 1984 by $1 billion-from $3.5 in 1983 to $2.5 billion last year-it was reported by the Economic Office of the Government of Israel here.

In disclosing Israel’s first economic statistics covering the full year of 1984, Uri Oren, a consul and government spokesman, also said that Israeli exports of goods and services rose by 13 percent in 1984 while imports of goods and services fell by 1 percent. Most of the gain in exports came in industrial products, especially electronics and metals, he noted.

Another favorable development was a decline in Israel’s balance-of-payments deficit last year, Oren reported. He said the decrease amounted to about 12 percent or some $600 million, compared with 1983.

PER CAPITA CONSUMPTION DOWN SHARPLY

The Israeli spokesman said that “a conscious government policy to discourage private spending” had resulted in a drop in consumption, on a percapita basis, of 7 percent compared with 1983. This decline, he said, was the largest year-to-year decrease in this category since 1950, a year of large-scale immigration to Israel.

“The actual erosion in the purchasing power of Israelis in real or dollar terms was more than 20 percent in 1984,” Oren declared. “This decline in the ability of Israelis to buy on the local market encouraged producers to seek bigger markets abroad, leading in turn to the rise in Israeli exports.”

NO CHANGE IN GNP

The Israeli official noted that the Israeli system of linking wage increases to the rise in the cost of living had been significantly altered under the terms of an agreement late last year among the government, the Histadrut, and the Israeli Manufacturers Association. Whereas workers had previously been compensated by wage increases amounting to 80 percent of inflation, the new rate is only 60 percent of the former linkage.

“This means, in fact, that the linkage now covers less than half of the rise in the cost of living or 48 percent,” Oren said.

Other statistics released by the Israeli Economic Offices here showed government spending up 3 percent-“largely as a result of a substantial rise in defense-related imports,” Oren said-and a decline in local investment of 9 percent.

During 1984, he said, Israel’s gross national product was the same as it had been in 1983. Manufacturing output in 1984 rose 1.2 percent over the previous year.

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