"Without health there is no economy but without economy there will be no health." This is what the Governor of the Bank of Israel, Professor Amir Yaron, said today at a special press conference he initiated, aimed at presenting a recent snapshot and explaining the policy steps the bank has taken in recent days.
"When the crisis ends will depend primarily on the world's ability to overcome the virus. However, it is the right policy that will dictate the rate of crisis exit and determine the size of its vulnerability. Our ultimate goal is to support the economy and society to help the society reach the next day.
According to the Bank's estimates, if the downtime continues until the end of April, the cost of the downtime will be about NIS 50 billion, about 3.5% of GDP. Another month will almost double the cost, reaching NIS 90 billion (about 6.4% of GDP).
If the government's restrictions are tightened, as these Prime Minister's Office examines these moments, the economic damage by the end of April will be NIS 69.2 billion (about 4.9% of GDP). If the severe restrictions continue until the end of May, the cost to the economy will be NIS 126.8 billion (about 9% of GDP).
"The ball is now passed to the Knesset and the government," Yaron said. "I am in close contact with the prime minister and the finance minister around the clock for the fiscal plan to be presented shortly. In my speech, I emphasized the importance of reducing the deficit and the ratio of debt to GDP, but these are not normal times. It is time to support businesses, to allow businesses to emerge from the crisis when the restrictions We need to help those who are affected by the decline in their business revenue and help those who are fired.
"I applaud the economic measures that the Treasury has taken so far. However, in order to deal with the crisis, we must allocate resources on a larger scale. Also at the cost of increasing the deficit. Therefore, it is appropriate to establish a significant budgetary security net of NIS 15 billion, as a percentage of GDP. At least as a starting point - an amount earmarked for the government's determined response to the Corona crisis and support for the survival of small and medium-sized businesses.
"As Governor of the Bank of Israel, I give the full backing to the government and the Knesset to take such steps. I urge the Knesset members and the decision-makers to transcend this disagreement and approve as soon as possible the plan presented by the Prime Minister, the Minister of Finance and the top of his office, and allow them the flexibility of action required as soon as possible. Act responsibly, with determination, speed and accountability while demonstrating leadership - the economy needs certainty. "
The Governor also said that "in the outbreak of the crisis, the financial system has run into liquidity difficulties, and we have launched three programs to assist in this area. First, we injected liquidity into the government bond market; second, we supported the foreign exchange market through exchange auctions. To sell foreign exchange in the market, but the tool we used relied on the high level of foreign exchange reserves that the Bank of Israel holds - as we have always explained - in times of crisis.
"Third, yesterday we announced an unprecedented $ 50 billion government bond purchase program to reduce credit costs for businesses and households." This is the broadest ever purchase plan. By comparison, in 2009, the Bank of Israel launched a NIS 18 billion purchase program to ease the economy during the global economic crisis.
The program aims to ease credit conditions in the economy and thereby support economic activity and financial stability. The acquisitions will allow the bank to affect bond yields, thereby lowering short-term interest rates, which should lower interest rates paid by businesses and households.