JERUSALEM, May 24 (AFP) - Israel's business community expressed high hopes Monday for economic revovery under the incoming government of Prime Minister-elect Ehud Barak, although his social spending promises have left some investors jittery. The Tel Aviv stock market reflected the mixed feelings when share prices plunged three percent on Sunday, investors said. The bourse had anticipated Barak's victory over right-wing incumbent premier Benjamin Netanyahu on May 17 with gains of nearly 30 percent since the early elections were called in December. But the main stock index dropped suddenly on Sunday -- in part due to profit taking but also because of a call by Avraham Shohat, a former finance minister from Barak's Labor Party, to tax capital gains on stock sales. "It would be better to refrain from making such statements, which only heighten uncertainty and destablize the markets," said Danny Gillerman, president of the Israeli chamber of commerce. Already during his campaign Barak worried some investors with promises to create 300,000 jobs within four years and launch massive public works investment projects in order to lower unemployment -- now nearly nine percent of the workforce. Most leading businessmen however remain bullish on Barak. "Barak's election victory should stimulate investments here by foreign companies who had been hesitating due to the deadlock in the peace process" under Netanyahu, said Yonatan Kolber, the chief executive officer of Israel's main industrial group, Koor. Dan Propper, head of the manufacturers' association, said the ball was currently in the court of the central bank, the target of much business ire for its policy of maintaining high interest rates to hold down inflation. Propper said a significant drop in the real interest rate, now at around seven percent, "is the precondition for reviving investments and the economy." The Bank of Israel ignored such appeals on Monday, keeping its tender rate at 12 percent after a meeting of its monetary policy committee. During the first quarter of the year, gross domestic product grew at an annual rhythm of only 1.3 percent, down from two percent last year and well below the average six percent per year enjoyed during the heyday of the peace process in the early 1990s. Despite the slowdown, Bank of Israel governor Yaacov Frenkel has agreed to only marginal cuts in interest rates in recent months despite a steady and significant fall in inflation, currently predicted to reach around four percent for the year. Fears that Barak will not follow the tight-budget policies of his predecessor are expected to keep Frenkel from changing his cautious stance. Barak's room to maneuver has also been restricted by the opening of the Israeli economy over the past three years, which has included making the national currency, the shekel, convertible on international markets. An officer at Israel's biggest bank, Hapoalim, said any tendency of Barak's government to let the state budget deficit or inflation get out of hand could quickly lead to a speculative attack on the shekel and scare off foreign investors. The danger has been heightened since Israel used up the last of 10 billion dollars in loan guarantees granted by the United States and which allowed successive governments to obtain low-interest loans over the past six years to help weather economic problems. "Any slippage by the next government could undermine Israeli credit and make borrowing more expensive on the international markets, a factor which would fuel inflation," said the banker, who spoke on condition of anonymity.  