(UNTITLED)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86T00608R000600060005-6
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 4
• Document Creation Date: December 19, 2016
• Document Release Date: May 24, 2005
• Sequence Number: 5
• Publication Date: July 17, 1975
• Content Type: MF

25X1
Approved For Release 2005/06/09 :CIA-RDP86T00608R000600060005-6
 25X1
17 July 1975)
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/09: CIA-RDP 6TOb60bSRQQ~1?OA0.60b05-6
The attached memor. anduin on
Israeli inflation was prepared
for the Vice-President at your
request.
Deputy Director
Economic Research
Approved For Release 2005/06/09 : CIA-RDP86T00608R000600060005-6
25X1
17 July 1975
(DATE) =w
Distribution: S-08341)
Orig. (for forwarding to Vice-President)
1 DD/OER; D ER; SA/ER
:125X1 3 St/P/C (1 - CRS; 1 - Treasury).
1 UCh/D/D
2 -'- D/NE -
25X?:
 Approved For Release (IYOV~b6~66L61P -I Uh6T00608R000600060005-6
The Israeli Inflation Situation
Israel 'is likely to experience an inflation rate on the
order of 20% this year, about half the 1974 rate but still
well above that recorded in the immediate pre-war years.
Israel is accustomed to rapid inflation. In 1971-i2,
for example, prices rose 12% a year, reflecting government
policies that placed a premium on rapid growth and full
employment.
.Inflation accelerated to 40% in 1974 largely because
of spiralling import prices. For example, prices of raw*,
materials and semi-manufactures,' which account for the
lion's share of Israel's imports, shot up 49% compared
with increases of less than 5% annually in 1971 and 1972.
Reductions in government subsidies and increased fuel
charges and utility taxes also added to the country's
inflation. Price pressures resulting from Israel's
heightened defense burden probably were relativ:aly minor
because increased assistance from the United States was
available to defray a major part of Israel's defense bill.
Israeli export competitiveness was maintained through
adjustments in export rebates and devaluation of the
Israeli pound in November.
.The impact of rapid inflation-on-the Israeli consumer
was largely offset by generous cost-of-living adjustments,
which pushed average monthly'wages in Israel up 45% in 1974.
CONFIDENTIAL
Approved For Release 2005/06/09 : CIA-RDP86T00608R000600060005-6
 Approved For Releas~Jgb'}0~M r:16I~'kb'P86T00608R000600060005-6
Only minor' changes in income patterns were observed: hardest
hit were the poor who saw their food costs rise sharply when
government subsidies on basic foodstuffs were reduced.
The slowing of inflation in 1975 is due solely to the
levelling off of import prices. We see no evidence that
Prime Minister Rabin has changed his basic economic policies,
which give priority to maintaining full employment and
sufficient economic growth to attract and absorb new
immigrants. The government is thus unlikely to
significantly restrict economic'activity in order to slow
inflation. Wages continue.to increase rapidly, because of a
30% pay raise in January and another 10% expected as a
result of labor negotiations now underway. Consequently
inflation will continue.
-2-
I
CON IDENTIAL
., .
Approved For Release 2005/06/09 : CIA-RDP86T00608R000600060005-6