Jerusalem, 27 March 2000

Israel’s National Accounts, 1999

(Communicated by Central Bureau of Statistics Spokesman)

The Central Bureau of Statistics has published the figures for Israel’s National Accounts for 1999.

GDP, in fixed prices, rose by 2.2% in 1999, similar to 1998, and compared to 2.9% in 1997, 4.6% in 1996 and 6-7% in 1994-5. In the second half of 1999, trends showed an accelerating GDP growth of 4.6% in annual terms, following the extended slowing of GDP growth from 5.3% in 1995 to 1.6% in the first half of 1999.

GDP per capita amounted to NIS 67,000 or approximately $16,000, in 1999, declining by 0.2% compared to 1998. GDP per capita rose between 0.5-4.3% annually between 1992-97.

Total resources and usage available for the economy rose by 5.8% in 1999, mainly due to a major increase, by 14.4%, of imports of goods and services. Exports of goods and services rose by 9.7% in 1999, investment in fixed assets rose by 6.5% and public and private expenditures rose by 3.5%. However investment in housing declined by 10.0%. The rising trade deficit in 1999 was partly offset by an improvement in conditions of trade. The total deficit, in fixed dollars and excluding defense imports rose from $2.1 billion in 1998 to $3.1 billion in 1999. Because of the improvement in conditions of trade, the real domestic income rose by 2.4%; 0.2% more than the rise in GDP. In contrast, real domestic income rose between 0.6-0.9% annually between 1996-98. Real domestic income per capita remained unchanged in 1999 compared to a year earlier.

A breakdown of GDP by sector shows that the gross domestic product of the business sector grew by 1.8% (compared to 2.2%, 2.9% and 5.3% in 1998, 1997 and 1996, respectively). The decline was mainly due to the sharp decline in construction and agricultural production and a relatively slow growth in the manufacturing sector. Work inputs in the business sector grew by 3.3% in 1999, after declining by 0.3% in 1998. The rise reflects the growth in the number of employees from the Palestinian Authority, partly offset by a decline in the number of foreign workers. Productivity declined by 1.9% in 1999 after rising by 2.2% in 1998.

Net domestic product in the manufacturing sector, including diamonds, rose by 1.7% in 1999 (compared to 2.6% in 1998, 1.7% in 1997 and between 5-8% annually between 1990-96. The largest growth was in the electrical and electronics sector. The construction sector declined, while the textiles, food, clothing and leather and heavy industries showed almost no change from a year earlier. Worker inputs changed in accordance with the changes in sectoral growth and productivity remained unchanged after rising over the previous six years.

Gross domestic product in the construction sector declined by 10.6% in 1999, following declines of 5.8% and 0.9% in 1998 and 1997 respectively. The decline was most significant in investment in public housing and other non-housing projects (28.8% and 16.6% respectively). Investment in infrastructure and other projects declined by 14.6% and investment in private housing declined by 6.0%.

Domestic product in agriculture declined by 5.9% in 1999, due to drought, after growing by 4.1% in 1998.

Domestic product in commercial and business services grew by 4.9% in 1999, following rises of 1.8% in 1998 and 2.8% in 1997. Domestic product in public and community services, based on government, local authority and non-profit associations’ (mostly financed by the government) salaries rose by 2.8% in 1999, following a 1.0% rise in 1998.

Disposable national income at market prices, including income from GDP and income from abroad and net current transfers reached NIS 62,000 per capita in 1999. Net national savings declined to 2.9% of national disposable income, compared to 4.5% in 1998. Disposable private income per capita, adjusted for inflation of private consumption, rose by 0.6% in 1999, following a rise of 1.3% in 1998. The net rate of private savings was 9.5% of disposable private income in 1999, a slight decline compared to the previous two years. The rate of gross private savings (after adjusting for depreciation on fixed assets) was 24.9%.

The deficit in public sector accounts was NIS 14.8 billion in 1999, NIS 6.5 billion higher than in the previous two years. The deficit was 3.6% of GDP in 1999, compared to 2.2% in 1998. Total government sector deficit, including the capital accounts deficit was 4.7% in 1999. Current government sector income rose by 6.5% in 1999, a rate lower than the rise in current prices GDP. In 1997-98, the rise in current income was higher than the rise in GDP. The rise in the collection of direct and indirect taxes was relatively low. In contrast, income of the National Insurance Institute grew faster than GDP growth. Public consumption expenditure, including salaries and procurement of goods and services, rose by 3.9% in 1999, in fixed prices, amounting to NIS 121 billion, or 29.6% of GDP.

Private consumption expenditure, in fixed prices, grew by 0.9% in 1999, continuing the declining trend in growth since 1994, when the growth in private consumption expenditure was 6.9%. Current private consumption expenditure (excluding durables) per capita rose by 0.9% in 1999, compared to 1.3%, 1.6% and 2.5% in 1998, 1997 and 1996, respectively. Per capita expenditure on food declined by 0.7% in 1999. Per capita expenditures on clothing, footwear and personal products remained almost unchanged, after declining in the past three years. Household fuel and electricity expenditure declined. In contrast household expenditure on education, health, cultural, entertainment, sports and household help services rose by 4.0%. Per capita expenditures on trips abroad rose by 6.9%. Current expenditures on housing services rose by 1.0%.

Purchases of durable goods rose by 0.7% in 1999, following a rise of 0.3% in 1998. Purchases of household electronics rose, while purchases of furniture and private vehicles declined. Total individual consumption of private and public services (including education, health and other services consumed by households) rose by 3.3% in 1999, a 0.9% per capita increase.

Gross investment in fixed assets and inventory rose by 9.8% in 1999, after declining in the previous two years. Much of the rise was due to raw material and finished products inventory increases in the diamond and high-tech sectors. Investment in fixed assets rose by 1.5% in 1999. Much of the increase reflects purchases of planes and ships 12 times the level of 1998. Excluding planes and ships, investment in fixed assets rose by 1.6%. Investment in non-housing construction, machinery, equipment, vehicles and software (amounting to one-third of investment in fixed assets) rose by 6.5%, following declines in the previous two years. Due to the rise in investment in fixed assets, the part of financing sources of gross national savings declined to 87.1% from 96.3% in 1998.

Exports of goods and services, in fixed prices, rose by 9.7% in 1999, following rises of 6.3% and 7.7% in 1998 and 1997 respectively. The growth was especially prominent in the second half oft he year 20.6% in annual terms, compared to 7.6% rise in the first have of 1999. Diamond exports rose by 16%, software 13.9% and tourism services 12.6%. Non-diamond manufactured exports grew by only 6.6% in 1999, compared to 10.4% in 1998 and 13.4% in 1997.

Imports of goods and services, in fixed prices, grew by 14.4%, compared to a 1-2% rise in 1997-98. The rise reflects a sharp increase in imports of raw diamonds and ships and aircraft. Excluding diamonds, ship, aircraft and security imports, total imports rose by 8.9%, compared to a rise of 4.5% in 1998.

Price of goods and services in the economy (GDP plus imports) rose by 6.7% in 1999, compared to 6.0% in 1998. This follows a decline in the rate of price increases from 11-13% in 1992-94, to 9% in 1995-96 and 7.4% in 1997. Prices of imports rose at a higher rate than GDP prices (7.1% to 6.4%). In each of the years 1990-98, GDP prices were higher than imports. The accumulated difference between 1990-99 is 37.5%.