The economic damage inflicted on Israel by the coronavirus outbreak is likely to take a serious bite out of its gross domestic product and could bring its growth rate in 2020 to a near-standstill, Finance Ministry officials said last week.
Health Ministry's limitations on public gathering, issued as part of the effort to curb the spread of the virus, have forced most of the private sector and some of the public sector to pause operations, excluding only essential services, such as the energy and banking sectors, supermarkets, pharmacies, and most medical services, from the rule.
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Experts believe that the damage the slowdown, which are expected to remain in place at least until after the Passover holiday, will inflict on the economy could exceed 45 billion shekels ($12.5 billion).
The ministry's Chief Economist Shira Greenberg estimates that at best, the steps declared to fight the outbreak will see gross domestic product lose some 1.6%, or NIS 25 billion ($7 billion), and at worst the GDP will lop 3%, or NIS 45 billion.
According to financial daily Globes, as the Finance Ministry's forecast for 2020 was a 3% growth in GDP, should the worst scenario manifest, Israel will see zero economic growth this year.
The Finance and Health ministries have been at odds about the nature of the lockdown imposed on the economy. The Health Ministry demanded a full shutdown while the Treasury warned that such draconian measures would cause irreparable damage to the economy.
Prime Minister Benjamin Netanyahu eventually sided with the Finance Ministry while adopting the strictest possible restrictions prescribed by the Health Ministry without completely paralyzing the economy, reducing it instead to 30% of its performance capacity.
The move forced countless companies nationwide to suspend operations and either fire their employees or places them on unpaid leave.
Since the measures were declared last week, over 500,000 Israelis have signed up for unemployment. The National Insurance Institute, which dispenses unemployment benefits, said it would waive the mandatory three-months waiting period and fast-track all claims.
Israel's low-single-digit unemployment rate have been obliterated as jobless rates soared to 16.5% in the span of 10 days.
According to Globes, an analysis by Daphna Aviram-Nitzan, director of the Center for Governance and the Economy at the Israel Democracy Institute, found that the number of employees and self-employed Israelis fired or put on unpaid leave was liable to reach 600,000.
This could potentially raise the monthly cost of unemployment benefits to NIS 4 billion ($1 billion), she said.
On Saturday, however, an unnamed Health Ministry official told Channel 12 News that shutting down the economy was the wrong move.
"This is the wrong concept. We have to bring the economy's output back up to full without delay, while people who have contracted [the coronavirus] must be quarantined and treated. The damage this [a shutdown] will cause to the livelihood of a million Israelis will be far greater" than what the outbreak may cause, he said.
Israel Export Institute Chairman Adiv Baruch told Israel Hayom that given the situation, the state must bolster exporting industries.
"Israeli exports are the oxygen to the economy. Over the years, we have seen a correlation between global trade growth and export growth, and there is no doubt that Israeli exports will be hurt [by the pandemic]. That's why we must provide exporters with more tools for tackling global competition, so we can see growth in services and technology products that provide an innovative and first-rate response to the new world order."
Meanwhile, the Israeli Association of Public Traded Companies called on the Bank of Israel to be the "responsible adult" and start buying corporate bonds and shares to alleviate a liquidity crisis stemming from the coronavirus outbreak.
Ilan Flato, chief executive of the organization, said that the coronavirus outbreak was one of the worst crises to ever hurt the global economy and Israel's government is not doing enough to steady capital markets and address liquidity problems.
This could lead to the collapse of dozens or hundreds of companies, he warned.
"The Bank of Israel must be the responsible adult and start intervening in the corporate bond and stock markets," said Flato, whose organization represents hundreds of public firms in Israel.
"The Bank of Israel buys foreign stocks and bonds every month and it's time to step in ... and also support purchases in the local market," he added.
The central bank declined to say whether it would start buying corporate bonds or shares but said it "has taken and will continue to use its policy tools to further support the Israeli economy at this time."
But despite all of this, global credit rating agency S&P estimated that Israel could avoid a recession.
The depreciation of the shekel against the dollar is a positive development that should help the Israeli economy overcome the coronavirus crisis, the latest report by S&P said.
In its initial assessment of the situation, the agency said it expects Israel to escape a massive economic downturn in 2020, but qualified, saying, "A full recession is not expected at this stage due to the robustness of the domestic economy and it will happen only in the event of an additional hit to the economy such as a geopolitical event or the collapse of real estate prices.
"Although Israel is also suffering a substantial slowdown because of the coronavirus outbreak, the local currency is actually depreciating, which is a factor that could help in the future by strengthening exports and bringing back inflation," S&P said.
