Israel’s Economy Reported Stable; Consolidation Seen in All Fields

Favorable developments in Israel’s economy during 1958 are being reinforced in 1959, according to a report issued here today by the American office of the Bank Leumi Le-Israel.”

The report says that prices and wages remained virtually stable in Israel, the money supply grew, exports rose, the balance of trade deficit contracted, and foreign exchange reserves reached a new peak in May this year.

“Although these trends are desirable ones, the substantial trade deficit and the relatively high price level make it imperative for the rate of improvement to be accelerated if the country is to achieve economic independence in the foreseeable future,” the report stresses. “In fact, for this aim to be attained, there must be brought about a major change in the employment structure of the population and in the relationship between consumption, investment and exports. It is thus the responsibility of the Government to frame its economic policy in such a manner as to achieve the channeling of a much larger than the present share of production to exports and investment, instead of consumption.”

Theodore K. Landau, assistant representative of the Bank Leumi in this country, reviewing economic and banking developments in Israel, said that 1958-59 can be characterized as a period of consolidation of the Israel economy rather than one of striking changes. He emphasized the following points:

1. Israel has reached a development level at which an amount in excess of all funds received from abroad by way of private, organizational and inter-governmental assistance, as well as long-term loans to the government, goes into investment channels.

2. Immigration was on a smaller scale than initially expected and the population increase was at a rate–normal for Israel but still quite high–of about five percent per annum.

3. Total production increased at the same rate as in previous years; however, output per worker increased by five percent.

4. Exports–both goods and services–which were $229 millions in 1957, increased to $239 millions in 1958 with 1959 exports somewhat in excess of 1958.

5. Total imports of goods and services, in 1958 exceed those of 1957 by only $16 million, while the 1958 import of customer goods was only $3 million more than 1957.

“There is a growing interest on the part of foreign investors in Israel stocks and investment trusts, the yield of good qualities, Israel equities being in the neighborhood of eight percent, reflecting the generally high interest rates in the country,” Mr. Landau reported.