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(photo credit: Courtesy )
Finance Minister Ronnie Bar-On on Sunday rejected a proposal to increase the government spending ceiling, as Labor MK Avishay Braverman had requested last week when he submitted a private bill to increase the spending growth target of the 2008 state budget to finance socio-economic issues.
Braverman's bill called for an increase of 2.5 percent, or NIS 2 billion, instead of the 1.7% originally set by the Finance Ministry.
"We are not going to change all of our fiscal policies based on what was written in the newspapers," Bar-On said at a meeting of the Action Committee in the Manufacturers' Association of Israel in Tel Aviv. "We are not going to overhaul our system because Braverman thinks that we should- the only change will come from the appropriate offices in the government, not from what he said."
In presenting his bill to the Knesset Finance Committee last week, Braverman argued that as the country was currently enjoying a budget surplus and the economy was growing at a rapid pace, money should be allocated towards socio-economic concerns such as welfare, schools and hospitals.
The comments came as statistics released by Central Bureau of Statistics showed that the local economy as measured by gross domestic product in the third quarter grew at an annualized rate of 6.1%, the fastest pace so far this year.
Bar-On, however, said that the country must focus not only on the local situation, but on how such a policy would effect Israel's standing around the world. "We are part of the global market and doing a change such as what Braverman wants is going to damage our international standing," Bar-On added.
Meanwhile, Shraga Brosh, president of the Manufacturers' Association, called on Bar-On at the meeting to provide immediate assistance to the country's embattled manufacturers and exporters, most of whom have been severely affected by the weakness of the US dollar. "We need someone to develop a plan for the long-term in order to aid these businesses," Brosh said. "We are requesting from the Finance Minister that we move our system off the dollar and connect it more to the euro or another foreign currency." Bar-On did not directly address Brosh's request, but did say that he would continue to lower corporate taxes over the next few years.
Separately, the Manufacturers' Association reported on Sunday that in a survey conducted among some 172 manufacturing companies, the majority said that over the third quarter, growth slowed considerably.
The Association's findings comes despite a recently released report from the Bank of Israel which found that among manufacturing companies in the third quarter, economic activity continued to significantly expand.
"Companies reported that the steep rise in activity in all industries was continuing, reflecting the persistent increase in domestic and foreign demand," the central bank's report said. "According to the survey, output and sales of the manufacturing industry--mainly domestic sales but export orders too--went up considerably. In the commerce industry, sales rose faster than previously and companies expect this to continue in the next quarter. Companies in the business services industry reported on greater sales revenue from both domestic and export sales. Companies reported expectations of continued increases in activity in the next quarter." According to Robby Ginel, director of the economics division in the Manufacturers' Association, however, a slowdown is expected to come not only in the pace of manufacturing output, but also in the number of local sales. "In the third quarter of 2007, only 49% of companies surveyed responded that they expanded during the third quarter, while 21% said that they reduced output," Ginel said. "Additionally, concerning local sales, only 42% said that sales increased in third quarter, while 19% reported a decrease." The exporters surveyed also reported a slowdown in the third quarter, as only 45% said they increased productivity, while 26% noted a drop-off.
Meanwhile, expectations for the fourth quarter were not brighter as only 37% of manufacturers expected to see growth in local sales, while 22% predicted a decrease.
Calls to the Bank of Israel were not returned by press time.