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Washington Writer Sees Israel Threatened by Full-fledged Recession

October 25, 1966
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A Washington Post financial writer, Hobart Rowan, in a report from Israel after a survey of economic developments there, said today in a dispatch to the Post that “Israel is threatened with a full-fledged recession.” He described the Israel Government’s efforts to restrain inflationary tendencies, and contrasted the far greater rise of industrial wages than productivity gains. He cited worries that unemployment in Israel would grow.

Mr. Rowan said that “investments in residential construction and in some major public works projects like the building of a vast new port at Ashdod have been slowed down. This has diminished total buying power among Israeli citizens, and the effects have been quickly felt.” He reported that Israeli labor was trying to persuade the Government to do something about rising prices, and said “one hears hints of some sort of price control action, but not until next year.”

The writer said: “The overwhelming dilemma is a balance of payment deficit that runs to about half a billion dollars a year, and which threatens to hit the seven to eight hundred million range by the 1970’s.” He noted that about half the current deficit was attributable to Israeli defense needs because of the arms race.

Rowan said that “if Israel is to make any progress toward internal economic stability, she will have to undergo a major period of austerity — cut consumption at home and boost her exports to the rest of the world.” He questioned whether a government could force a deflation and stay in office, pointing out that this was a “real consideration” in Israel as in other countries facing similar problems. He reported that the European Common Market was not enthusiastic about expanding outside of Europe, and that Israel’s citrus and other products might pose a competitive problem within Euromart.

Rowan noted, however, that “even after a brief visit to this remarkable country, the chief answers to its economic problems lie in its own strength and not in help from the outside.” He said that “recession is only a relative thing. The downturn is from a high level of prosperity that brought per capita income to more than $1,000. This equals the standard of living of many European countries.”

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