Finance Ministry says it could take five years for economy to recover

GDP could contract by 7.2% in 2020 if economic restrictions are reimposed due to coronavirus pandemic, according to forecast

Israelis shop at the Mahane Yehuda market in Jerusalem on June 03, 2020. (Olivier Fitoussi/Flash90)
Israelis shop at the Mahane Yehuda market in Jerusalem on June 03, 2020. (Olivier Fitoussi/Flash90)

It may take up to five years for the Israeli economy to fully recover from the shock it received during the coronavirus pandemic, the Finance Ministry predicted in an economic forecast published on Sunday.

In its forecast for 2020-2023, the ministry offered two distinct paths the economy could take in the coming years, one in which the pandemic is brought under control, leading to a gradual improvement in Israelis’ economic circumstances, and another in which a rise in coronavirus deaths requires the reimposition of economic restrictions, hampering recovery.

Should the pandemic stay largely under control, allowing for the economy to revive, the ministry projected the GDP will shrink by 5.9 percent in 2020, followed by 5.7% growth the following year.  In this scenario, unemployment would remain around 9.7% at the end of the year.

However, in the event of an exacerbation of the public health crisis causing increased economic restrictions, unemployment would rise to 15% by the end of the year and the GDP would contract by 7.2% in 2020 and only rise 2.2% in 2021.

A man hangs a ‘for rent’ sign on a store in Jerusalem on July 12, 2020. (Olivier Fitoussi/Flash90)

In either case, a full economic recovery would probably take around half a decade, and certainly will not occur before 2023.

During a national lockdown in March-April, the economy came to an almost total standstill. Unemployment soared to 26% and over a million Israelis were out of work. Over the past few months restrictions have mostly been lifted, but unemployment remains at over 20% with some 800,000 Israelis jobless or furloughed, according to the Israeli Employment Service.

(The Central Bureau of Statistics has provided different numbers, reporting last month that unemployment stood at 10.7% in June.)

Over a million Israelis started receiving government coronavirus handouts on Sunday as part of a coronavirus stimulus package that will eventually see more than NIS 6.5 billion ($1.9 billion) disbursed to eligible citizens.

In addition, last Tuesday, the Knesset gave final approval to an economic plan to aid battered businesses and workers hurt by the pandemic and its restrictions.

Self-employed Israelis protest at Rabin Square in Tel Aviv, calling for financial support from the government on July 11, 2020. (Miriam Alster/Flash90)

According to a survey published by the CBS on July 26, 55% of Israelis were worried about their ability to cover monthly expenses during the economic downturn and more than a fifth had either reduced their food intake during the crisis to save money or lived with someone who had.

On Saturday, recently appointed coronavirus czar Prof. Ronni Gamzu said he was less concerned about hospitals being overwhelmed with sick patients than about the socioeconomic impact of the pandemic.

“The socioeconomic trauma is much greater” than the health one, he told Channel 13 in one of several interviews aired during the evening.

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