Inevitably, much of the consumer spending was on imported goods and services. Moreover, even increased consumption of Israeli-made products also raises imports, because of the import content of these products. Though exports continued to rise, they were outpaced by the growth in imports of goods and services. The deficit in the current account balance soared. An austerity program sounds innocuous, but it implies an economic slowdown, rising unemployment, curtailed personal incomes, and other hardships for many citizens.
Austerity measures can and do cause pain, especially for the poorer sectors of society.
Israel's elaborate social welfare programs may cushion the impact of these austerity measures, but do not eliminate them. The negative developments were mainly a much slower economic growth rate and rising unemployment. But there were also important pluses, including a resumption of the downward trend in inflation. Between 1992 and 1996 the average annual rate of increase in the consumer price index ranged between 10 and 12 percent, showing no distinct trend. In 1998 it was down sharply to 5.4 percent.