ISRAELI BANK SAYS ELECTION COULD HARM ECONOMY
Israel's central bank said in its
annual report the country made striking gains in 1986 under an
austerity program, but warned a national election campaign
could harm the economy.
    Elections are due by November 1988, but tension within the
government over a Middle East peace conference has led many
political analysts to predict the government may fall earlier.
    Bank of Israel governor Michael Bruno told a news
conference the austerity since July 1985 had balanced the
national budget for the first time in 15 years, and pushed
inflation from 400 pct a year to just below 20 pct in 1986.
    But Bruno warned that if politicians followed their past
practice of lifting customs duties and increasing government
subsidies on basic goods in order to curry public favour during
elections, the gains of the program could be lost.
    "The great success of the national unity government in
executing the economic programme ... Depends on its ability to
show proper judgement towards economic issues also when
elections are on the horizon," Bruno said.
    He blamed a 12 pct rise in real wages in 1986 for a sharp
increase in private consumption, and said higher pay was
harming attempts to push inflation to under 10 pct a year.
    "The lowering of inflation was one of the striking successes
of 1986," Bruno said.
    "It is important to note that in this area of economic
stability we still have to tread a delicate path to reach an
annualised inflation rate of 10 pct in the second half of this
year," he said. He added that this was achievable.
    The Bank's report said Israel's gross domestic product grew
by 2.2 pct in 1986. The business GDP, which most economists
view as a better indicator of economic growth, rose by 3.7 pct.
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