Rabinowitz: Economic Situation Can Be Improved in About Two Years if Necessary Measures Are Taken No

Finance Minister Yehoshua Rabinowitz held out hope today for greatly improved economic conditions in about two years provided that Israelis take the painful measures necessary to bring the country out of its present economic crisis–and provided that the political situation remains stable.

Rabinowitz addressed the Knesset at length today on the content and objectives of the IL 85.2 billion national budget for fiscal 1976-77 which he described as “the first budget in the history of the State providing less means for government ministry operations.” He added that “The difficult times we are facing, the burdens obligate us to strive more and do with less.”

He said the central economic problem that faced Israel since its establishment has been balance of payments, meaning that the country imports more than it sells abroad. The government’s economic policy therefore is focussed on two principal goals–to check the deteriorating balance of payments and to curb inflationary pressures, Rabinowitz said.

The Finance Minister said “Our economic situation will improve gradually but significantly” if the right steps are taken. He warned, however that there is no way to avoid the material difficulties expected over the next two years. But from 1978 on we can expect “an ever increasing improvement in our situation,” he said.

PREDICTS ECONOMIC GROWTH

Rabinowitz warned in that connection that the improvements will not come about by themselves “We will have to continue to follow an energetic policy in order to ensure their attainment.” He predicted that in the course of 1978, economic growth will increase and approach rates to which Israel was accustomed in the past. He forecast a gross national product increase of 7 percent per annum from 1978-1980, a substantial growth in investments and an improvement in the exploitation of existing capital.

“If we act with courage and wisdom we shall bring closer the day when the economy will once again show rapid growth, when the current balance of payment deficit shrinks to dimensions we can live with, when the standard of living can again begin to rise,” Rabinowitz said. “But for this day to arrive as soon as possible, we must be ready to take the difficult road ahead, each and every one of us each sector of the economy assuming their share of the burden.”

The Finance Minister listed the burdens, among them reduction of private and public spending and consumption, a cooling off of the economy to a growth rate of about one percent per annum to curb inflation, a reduction in government services and subsidies and incentives for export producing industries.

Rabinowitz said the subsidies budget for fiscal 1976 is about 50 percent smaller in real terms than the fiscal 1975 budget. He said the objective was to bring consumer prices closer to their real value and that the new principles have been formulated in close consultation with Histadrut. Rabinowitz, noted that the defense budget for fiscal 1976 totals IL 32.3 billion compared to IL 25.3 billion last year. He said the increase was necessary to continue strengthening the defense forces and to cover price rises.