Israel’s National Accounts for 1998

(Communicated by the Central Bureau of Statistics Spokesman)
January, 3 January 1999

The Central Bureau of Statistics on Wednesday, 30.12.98, reported its preliminary economic estimates for 1998.

In 1998, Israel’s GDP (in fixed prices) rose by 2%, similar to 1997, but lower than the 4.5% increase in 1996 and the 7% increase of both 1995 and 1994. Meanwhile, given the 2-3% population increase in 1998, GDP per capita declined in 1998 — after having remained static in 1997 and actually increased during 1994-1996 — reflecting a 7% decline in investments, and slowed growth in the export of goods and services (5%, from 7% in 1997), and in private consumption (3%, from 4% in 1997). Public consumption, however, increased by 3% (from 2% in 1997).

Total private consumption expenditure rose by 3%, or 1% per capita, continuing the downward per capita trend of recent years. No change was recorded in per capita purchases of durable goods, with a 7% decrease in the purchase of private cars and a 5-6% increase in the purchase of household durable goods such as refrigerators and washing machines. Slowed growth was also noted in current private consumption expenditures (excluding durable goods) per capita, reflecting a 2% decline in food expenditures and a 1% decline in expenditures on fuel and electricity; these declines were offset, however, by a 2% increase in per capita expenditures on miscellaneous services such as health, education and entertainment, and a 3% increase in the purchase of non-durable goods. Per capita spending also increased in the areas of foreign travel (6%) and housing-related services (2%).

Individual public consumption expenditure, including education, health, welfare and culture (excepting administrative costs), increased by 3% in 1998, compared to a 4-5% rise in both 1996 and 1997. During 1998, collective public consumption expenditure, including defense, public order and civilian administration, rose by 3-4%, compared with 1% in 1997 and 7% in 1996.

As in 1997, gross domestic investment, including investments in fixed assets and inventories, declined by 7% in 1998, following continuous growth between 1990-96. Declines in investment were recorded in fixed assets (4%), residential construction (public by 18%, private by 4%), and buses and commercial vehicles (30%). In contrast, increased investments were made in machinery and equipment (3%) and software (8%).

Exports of goods and services, in fixed prices, grew by 5% in 1998, compared to a 7% increase in 1997, with major increases in electronics and software. Industrial exports (excluding diamonds) and various service-related exports (excepting tourism) expanded by 9%. Tourism income remained flat and diamond exports fell by 10%. Agricultural exports again registered large gains, showing an 18% increase in 1998.

Imports of goods and services, in fixed prices, rose by 3% in 1998 (as in 1997), following increases of 8-16% between 1990-96; the sharp 18% decline in unfinished diamond imports by 18% was a major cause of the slowed expansion.

The terms of trade did, however, improve in 1998, with export prices rising 2-3% more that import prices, thereby reducing Israel’s trade deficit in goods and services (excluding defense imports) to $9 billion in 1998, compared to $11.3 billion last year. This deficit was partially financed through foreign contributions and grants — amounting to an overall trade deficit (after current and capital transfers) of $3.4 billion, or 3.5% of the GDP, compared to $4.9 billion (or 4.9% of GDP) in 1997.

Business sector output increased by just over 1.5% in 1998, compared to 2% in 1997, 5-6% in 1996 and 6-9% annually between 1990-95 (1993 excepted). Industrial output rose by 2-3% in 1998 (compared to smaller increase in 1997, and 5-11% annual increases between 1990-96). The low increases of the past two years reflect decreased production in construction materials and stabilized output levels in the food, textile and clothing sectors.

Unemployment rose to 8.7% — up from 7.7% in 1997 and 6.7% in 1996 — while hourly wages in the business sector, not accounting for cost-of-living increases, also rose by 4% in 1998, after 3% increases in both 1997 and 1996. 87% of all labor performed in 1998 was provided by Israelis; 10% came from foreign workers and another 3% from workers based in the Palestinian autonomy, making for an 11% increase in Palestinian integration within the Israeli work force. Productivity rose by 1% after declining in 1997.

Public and communal services output — measured by salaries paid to employees of government, local authorities and publicly funded non-profit organizations – – rose by 1.5% in 1998, compared to 2% increases in 1997 and 1996.

Meanwhile, the prices of goods and services (domestic output and imports) rose by only 6% in 1998, compared to higher increases reported since 1992. At the same time, the differential between the increased prices of domestic goods and services (7%) and those of imports (4%) was relatively small.