Behind the Headlines: Israeli Economy is Stagnating, but Public Doesn’t Seem to Care

Less than three months before elections, Israel’s economy has rarely been in worse shape.

It is stagnant. There are no harbingers of growth. The retail trade is suffering. And unemployment continues to rise.

The Bank of Israel, the country’s central bank, reported a 3 percent decline in economic activity during the first quarter of 1992.

“The economic picture is not rosy,” said the bank’s governor, Jacob Frenkel, who has a reputation for understatement.

Yet the public seems almost indifferent. There are no signs that people are alarmed by the bad economic news. The Tel Aviv Stock Exchange remains bullish.

The central bank measures economic activity by a special index that combines data on industrial production, retail trade, imports and job offers.

Despite the gloomy statistics it released over the weekend — economic activity down 0.3 percent in February alone — stock prices soared Sunday. Some shares, such as Elite foods, gained 6.5 percent in value.

The stock market did not reflect the fall-off in exports and the 2 percent drop in imports of raw material used by the export industries in February.

Nor did it seem troubled that the volume of trade is off or that agriculture has suffered badly from the exceptionally harsh winter.

A DEARTH OF INVESTMENTS

But economists are seriously concerned by the dearth of investments in new projects since the beginning of the year. In part, the lag is attributed to Washington’s refusal to underwrite $10 billion in immigrant absorption loans Israel needs over the next five years.

Economists also point to the sheer drop in aliyah as a basic cause of the slump. Since the country failed to offer them job opportunities, the flood of olim became a trickle.

From a peak of 20,000 arrivals a month from the former Soviet Union, the aliyah rate has fallen to under 5,000. Meanwhile, the rate of job offers fell by a record 19 percent in February, the Bank of Israel reported.

The boom in demand for housing and other consumer essentials that massive immigration was supposed to trigger did not materialize. Small businesses reported a dramatic decline in sales. Electrical appliances were off by 50 percent in February; clothing and shoe sales fell 37 percent.

The Treasury has criticized the Bank of Israel for not stimulating the economy by a reduction of the prime rate, the interest rate banks pay for money.

But while the government is keen on showing improvement in an election year, it can point to little more than holding down Israel’s double-digit inflation rate to 14 percent.

It predicts, however, that the jobless rate will fall in the near future, when work begins to repair the infrastructure damaged by the succession of winter storms.

If Israelis do not seem worried, it may be because they have learned by now that election campaigns tend to remedy economic ills.