OECD: 2020 is a year of "deep shock" in the Israeli economy

2020 is a year of "deep shock" in the Israeli economy, which is reflected in a sharp and unprecedented decline in GDP, accompanied by a "severe injury" to employment; The corona crisis "threatens to undo any progress made in raising the standard of living of its citizens", and in particular "to aggravate Israel's structural problems"; This emerges from the annual report published today (Wednesday) by the OECD.
The OECD's recession forecast for Israel is relatively 'generous', with an annual decline of only 6% - compared with the Bank of Israel's 7% in its pessimistic scenario. The organization emphasizes that this year there has been a reversal of a trend in both growth and employment - since for the first time since Israel joined the OECD, there has been a sharp and unprecedented jump in unemployment, with Israel facing a second wave of corona these days.
This year, too, the organization's economists detail hundreds of policy recommendations in every possible field, emphasizing that if Israel adopts the same structural reforms it must soon - and did not - GDP per capita will increase within a decade by another 3 percentage points, within two decades (2040) by 9 percentage points and more 30 years at an additional 15 percentage points. "Structural reforms are the key to a solid, sustainable and inclusive recovery from the Corona crisis," the report said.
The report praises the monetary policy of the Bank of Israel and the government's response in the form of assistance to the unemployed and businesses, but also recommends directing spending wisely and wisely - since, according to its authors, even if Israel makes all the reforms, government debt will exceed 80% of GDP already next year and to 100% in 2025. This is compared to 61% of GDP now - a jump of 20 percentage points in about 15 months.
Among the main recommendations detailed in the report: Continued massive liquidity flow led by the Bank of Israel, to prevent liquidity crisis against the background of increased business risk and the expectation of an increase in bankruptcies; Introduction of bank deposit insurance; Continued government inflow while strengthening resources, including job creation And vocational training; formulating a clear medium-to-long outline for reducing the deficit and government debt, which, as mentioned, may rise; massive investment in physical infrastructure, including public transportation, education and poverty reduction.
At the budgetary level, the OECD recommends the establishment of an independent fiscal council that will oversee the implementation of the state budget and taxes, and the reduction of tax exemptions - including study funds and VAT, disciplinary increase in labor grants (negative income tax), imposing congestion charge, raising parking fees In cities and raising taxes on polluting fuels.

In order to reduce the gaps in the organization of developed countries, it is recommended to expand vocational training, including among the ultra-Orthodox and the Arabs, while investing in Hebrew studies among the Arabs and core studies among the ultra-Orthodox.

The report details a very deep reform of local government, on several levels - including a change in the mechanisms for allocating resources from property taxes, so that rich gates will transfer money to poorer authorities, in order to reduce inequality. The OECD emphasizes that too little progress has been made in regulation And competitiveness of the economy, and therefore again calls for the lowering of tariffs and other trade barriers.