The directives announced by P.M Netanyahu will lead to a NIS 45 billion damage to the economy


by Ifi Reporter Category:Financial Mar 16, 2020

The directives announced by Prime Minister Benjamin Netanyahu and Finance Minister Moshe Kahlon in the shadow of the krona crisis will lead to a NIS 45 billion damage to the Israeli economy. That's how the chief economist of the Treasury, Shira Greenberg, estimates. Greenberg states that the measures announced to combat the spread of the Corona epidemic are expected to bring about a decline in GDP, estimated at about NIS 25 billion (representing about 1.6% of GDP). In addition, Greenberg estimates that the decline in GDP as a result of the measures announced until last weekend, alongside the impact of the global economy on the local economy during 2020, is expected to amount to about NIS 20 billion (constituting 1.4% of GDP).
The expected decline in growth at this time is 3%, which will lead to a fall in state revenues of 1.2%. However, the Treasury emphasizes that there is a great deal of uncertainty about the characteristics of the virus's spread and its effects on the global and local economy.
The estimate of the cost of unemployment benefits, given the changes that were decided today (for example, reducing from 12 working months to six working months before the unemployment period), and increasing the number of unemployed - will cost NIS 4 billion.

The Employment Service updated on Monday that 11,800 jobseekers were registered yesterday, of which 7,400 were unemployed (paid leave). From the beginning of March until this morning at 9am, some 40,000 jobseekers were registered - half of them expelled By the employers for free leave - this compares with only 321 people who were registered as a result of the whole of February.
Due to heavy site registration burdens, the Employment Service will allow registrants to retain their rights during the week: Anyone who signs up by Thursday, March 19, will be deemed to have registered yesterday, and all rights will be retained. In addition, it will allow manual enrollment in offices without queue and without meeting with the placement coordinator.
The Employment Service said it was preparing for the layoffs, tripling the number of servers on the site and expanding its capabilities as far as possible to withstand referrals, but logging tens of thousands of users at one time on the same page - could make it more difficult to operate.
Mi Graur, CEO of the Employment Service, said: "We are doing everything we can to ease the public on these complex days. We will continue to expand the infrastructure and capabilities of the Employment Service website, and at the same time, we are increasing call center 9687 *, which provides a telephone answering for enrollments. "
Senior economic sources warn of the serious economic consequences of shutting down the economy and declaring an emergency, so that only essential businesses (which account for about 30% of the economy) continue to operate. The sources say that imposing a closure for a month-and-a-half period is possible, but not beyond that - and such a period will also cost the economy a significant impact on GDP.
In their estimation, Israel's debt is expected to surge in such a case, and to reduce the debt-to-GDP ratio to at least 70%. Longer closures will already bring Israel's debt to much higher levels.
 According to sources, lowering the economy's output by two-thirds will cost him a loss of at least 4%, assuming the closure will continue until after Passover. A closure that lasts for a month and a half will already reach 6% of GDP - NIS 90-80 billion.
The basis for the assessment that closure is the most effective means of spreading the epidemic is China's experience, which at least for now seems to have succeeded in stopping the spread of the virus after imposing a total closure on tens of millions of its citizens for about 50 days. If this estimate is correct, and a four to six-week closure does indeed explain the epidemic, the economy could absorb the loss. The problem is that there is no certainty. The serious concern is that after a few weeks' closure, we will wake up to another wave of the disease, and we will find that another long-term closure is needed - with no known end date. The senior officials warn of this. In their estimation, the economy will not be able to withstand a closure period of more than a month and a half.
"Returning for a few months, without a predetermined end period, is already bringing us to the scenarios of the Yom Kippur War" - when the Israeli economy plunged within two years from 12% growth to only 1.5% per year, and lost to the lost decade. This is a heavy loss, which the economy will find very difficult to recover from. "This is a serious hit with long-term consequences, because businesses will already go bankrupt and huge capital will be lost. It will be very difficult to re-energize the economy. A decision on a prolonged closure is a decision that should only be made after discretion, and an understanding of the price involved. "
The Israeli economy is already in the process of declining, with entire sectors already closed (including the education system, the courts and tourism, leisure and catering). A large number of employees are afraid to leave the house and are afraid to consume. This means that economic damage is inevitable - but the economy as a whole continues to function, all the while the government does not order it to stop.
In the estimation of the top economic factors, a decision on a complete closure of the economy should be made only for a fixed period - say until after Passover. According to them, if this time period turns out to be insufficient and the epidemic continues to rage, it will be necessary to stop and rethink how it works. Apart from closure, there are also alternative models, that of South Korea: multiple testing, monitoring patients to put closure on anyone who came into contact with them. You can also switch to the British coping model: protecting the elderly and the sick only, without stopping the spread of the virus.
A survey shows that one-third of high-tech companies are considering starting mass layoffs.
In any case, the forecasts for the economy are terribly pessimistic. Loss of 4% of GDP is probably already inevitable, as is a rise in the debt-to-GDP ratio of at least 70%. There will also be a marked deterioration in the government's fiscal situation, due to the fall in taxes alongside the need for fiscal tools to encourage the economy. The step of taking employees on vacation for free, at the expense of unemployment, gets praise. So are the decisions to postpone collection of taxes, property taxes and electricity bills. However, the economic factors call for finding a solution to the needy of the self-employed - for example, paying a minimum unemployment benefit, at the minimum wage, to self-employed people for a fixed period.




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