U.N. Report Says Israel’s Economy Still Depends on Aid from Abroad

Israel’s economic achievements during the past year, as well as the serious economic problems which it is still facing, are outlined in a report issued here today by the United Nations.

The report emphasizes that Israel is now producing about 70 percent of its own food and an even higher percentage of certain manufactured goods needed for internal consumption. At the same time, the report stresses, Israel’s wholesale price index is rising steadily and defense expenditures are climbing.

“At the present stage,” the report declares, “the country is still far from achieving an external financial equilibrium. Without further external financial aid, it is doubtful whether the progress so far achieved can even be maintained, especially in the face of a continuing–possibly heavy–influx of immigration.”

Israel’s total foreign obligations, states the report, was $299,600,000 by the end of March, 1957, as against $89,600,000 in foreign currency balances, with a net outstanding liability of $210,000,000. “This,” the report adds, “is likely to become a burden on the economy, and additional difficulties are to be expected by 1962, when payments under the German Reparations Agreement will have ended.” The report calls attention to the fact that, as of September 1, 1957, almost half of the total of $822,000,000 provided for in the German-Israel Reparations Agreement of 1952 has been paid out in goods and services.

In general, the report states, “inflation is one of Israel’s greatest obstacles to achieving its aims in a reasonable amount of time.” While the statistical tables in the report show vast progress in almost every field of Israel’s economy activity, internal as well as external, it declares that “the inflationary process characterizing its economy makes it increasingly difficult for Israel to achieve a level of consumption–private and public–properly related to the income produced in the country itself.”

DECREASE IN UNEMPLOYMENT; INCREASE IN GOVERNMENT EXPENDITURES

The UN report says that “a feature of Israel’s growth in recent years is that consumption has been exceeding net output.” Israel’s “net national product” in 1956 aggregated 2,337,000,000 Israeli pounds, but its total consumption exceeded that figure by 202,000,000 pounds. Most of that discrepancy was due to what the report calls “public consumption,” which almost doubled in 1956 over the 1953 level, while private consumption in that period rose only by 34 percent.

General wholesale prices rose last year to an index figure of 151, based on 1953 costs, while the cost of living index rose to 137. During the period from 1953 to September 1957, the number of unemployed in Israel decreased from 17,680 to 8,920, in spite of the fact that the total population had risen considerably.

“Government expenditure,” the report declares, “has been steadily increasing, not only in absolute figures but also relatively to gross national product.” The figures show that government expenditures were 88.37 million Israeli pounds in 1950, and had risen to 662.56 million by 1956, by which time those expenditures had gone up to 26.4 percent of the gross national product.

The figures for government expenditures are even higher, the report indicates, because they “do not give a full account of the defense expenditure.” Furthermore, the report states, the figures for the central government’s expenditures do not include monies spent by municipalities or by the Jewish Agency “and certain other public bodies.”

Private investments have gone up from 185 million Israeli pounds in 1953 to 265 million in 1956, the report establishes. It also shows the increase in “gross domestic capital formation” in the country, which includes dwellings, non-residential buildings and other construction, transport equipment, machinery and other equipment, and stocks in share corporations. This figure almost doubled in the last four years, increasing from 332.8 million Israeli pounds to 623.2 million. Manufacturing production increased by 143.59 percent in the four years while agricultural production went up during those years by 156.48 percent.

The figures concerning Israel are part of an overall report, entitled “Economic Developments in the Middle East, 1956-1957,” issued by the United Nations as a supplement to its world economic survey for 1957. The inflationary cycle is world-wide according to the world survey. The report also shows that, in the entire Middle East region, Israel ranked first in figures for per capita consumption. Israel’s figures show the countries inhabitants having “a total caloric intake of 2,860 per day,” with Turkey next and Egypt third.