War to slow industry growth to 4.5%

The employment growth rate in the manufacturing industry is expected to come down by some 1,400 employees in 2006 as a result of the war in the North, the Manufacturing Association of Israel said Thursday, while the Finance Ministry said it was still early to assess the actual costs of the war. According to estimates by Nira Shamir, head of the economics division of the Manufacturers' Association, the war will slow industry's growth to 4.5% in 2006 from the 5.5% forecast before the war. At the same time, employment growth estimates were revised from 2.7%, or 9,000 new employees, before the war to 2.3%, or 7,600 employees. In 2006, the total number of employees in the manufacturing industry is expected to reach 345,000. Meanwhile, in an interview with Bloomberg Television, Yossi Bachar, director general at the Ministry of Finance, said there was no question the war had a negative impact on Israel's strong economy. "We have to distinguish between the direct costs associated with bringing the situation back to what it was," Bachar said, referring to compensation issues. "We assume that those costs are going to be around $1 billion." On top of that, he said there were indirect costs what would be part of the 2007 budget. "We have to see how we compensate people for the economic losses that they have," he said. As for the conflict's impact on gross domestic product, e said "It is quite early to assess the cost of the war, because the direct costs can be around $2b." He noted, however, that "of we maintain the same policy, we will get back to normal quite quickly." Bloomberg contributed to this report