Forecast Expanding Economy, Increased Employment, and Larger Trade Deficit

Forecasts of an expanding economy, increased employment and more exports were presented to the Cabinet today in a report by Finance Minister Zeev Sharef. But it was disclosed at the same time that Israel’s trade deficit for the current fiscal year will amount to an estimated $600 million compared to $424 million in fiscal 1967. The occasion for the report was the Cabinet’s debate on the national budget for fiscal 1969, which begin April 1. Next year’s overall budget was expected to exceed $2 billion compared to $1.57 billion approved by the Knesset (Parliament) for the current fiscal year.

The projected larger trade deficit, despite increasing exports, is attributed in part to an entry of investment goods, to defense needs and increased private consumption. Ephraim Dovrat, financial adviser to the Treasury said the projected deficit did not include the 50 Phantom jet planes that Israel is seeking to buy from the United States. Today’s Cabinet meeting was presided over by Deputy Prime Minister Yigal Allon. Prime Minister Levi Eshkol was ill with a virus. Another Cabinet meeting is slated for tomorrow at which time political matters not taken up today may be discussed.

According to Mr. Sharef’s report, Israel’s gross national product grew by 12-13 percent in 1968. The number of employed persons rose by nine percent of 75,000 workers. Investments grew by 40 percent and exports by 16 percent. The circulation of currency and negotiable paper rose considerably but prices remained stable on the whole owing to a large increase in private savings. Despite an internal demand for goods, industrial exports rose by 23 percent. The forecast for 1969 saw a seven percent rise in employment and a four percent increase in productivity per person owing to increased efficiency and the introduction of automation. The report predicted an 11 percent increase in the gross national product and a 12 percent increase in exports in 1969 but did not say how large the expected trade deficit would be. It predicted a 12 percent increase in investments.

The Israel Government is trying to force certain local manufacturers to lower production costs by reducing tariff protection so that competitive foreign merchandise will sell in Israel at the same or even lower prices than the home-made product. A step in that direction was announced today with the publication of a list of 600 imported items on which customs duties will be lowered by five to 30 percent. They include a wide range of imports from electronics to leather goods and textiles. The reductions will go into effect on Jan. 1, 1969. According to the Ministry of Trade and Industry, the reductions will force Israeli manufacturers to adopt more efficient methods which will enable them eventually to compete on the international market.