Finance Ministry to expand virus rescue package to NIS 100 billion
Increase of NIS 15.6 billion includes grants to help businesses return employees to workforce amid historically high unemployment, funding for tech firms, small businesses
The Finance Ministry on Friday said it plans to expand the government’s economic rescue package for the coronavirus crisis by NIS 15.6 billion ($4.4 billion), bringing the total response to NIS 100 billion ($28.5 billion).
According to a legislative memorandum released by the Finance Ministry, the additional funding will require changes to Israel’s Basic Law: The State Economy, allowing the government to spend NIS 14 billion more than is currently allowed.
The new package will include NIS 6 billion in grants to help businesses return employees to the workforce, which was first announced in late April, and NIS 4 billion in credit for high-risk businesses, including restaurants and cafes.
The bill provides NIS 2 billion for high tech companies and state guarantees for vendor credit worth $750 million. A loan fund for small and medium businesses will expand from NIS 8 billion to NIS 14 billion.
The program will result in a further increase in Israel’s budget deficit, which was projected to reach 10.2 percent this year, before the announcement of Friday’s new stimulus, the Globes business daily reported. The 2020 budget has not yet been approved.
The government stimulus package previously amounted to NIS 80 billion, the largest in Israel’s history. The new addition, plus new funding for government offices, brings the total rescue package to NIS 100 billion.
Businesses and economists have decried what they call a lack of economic leadership in Israel’s response to the pandemic, saying that the economic package that the country provided was too little, too late, as unemployment skyrocketed and businesses warned they may have to permanently shut down due to lockdown restrictions.
The package is very conservative compared to those of other countries, critics said. And implementation is experiencing hiccups, with businesses accusing the banks of dragging their feet in vetting, and then turning down their applications for the government-backed loans because they are deemed too risky.
Hundreds of small business owners and self-employed workers have regularly protested for increased government assistance. Self-employed workers are not entitled to unemployment benefits.
Information regarding what state aid is being given and who can benefit has been confusing, critics said, with ministry officials adding sums and earmarking money ad hoc rather than setting out a clear and well-defined strategy. And even when money is made available, it is not reaching the businesses that need it fast enough, they said.
Research released on Tuesday found that Israel’s coronavirus aid package is relatively small, amounting to half of what is being offered by other developed countries with similar economic characteristics.
As the number of new infections has slowed dramatically, the government has begun loosening the restrictions that contained the pandemic, offering some hope to struggling workers and businesses.
On Monday, for the first time since the coronavirus lockdown began to ravage the economy, the number of people who returned to work over in 24 hours was significantly higher than those who registered as unemployed, the National Employment Service reported.
Unemployment figures leaped from a record low of 4% at the beginning of March to 27% in April, with 1.2 million jobless, as many businesses were forced to close their doors while the public was ordered off the streets.
A malfunction in the Tax Authority website this week meant tens of thousands of Israelis would have to reenter their requests for grants after losing their income due to the crisis.
In a Central Bureau of Statistics report conducted during the final week of April, 46.1% of the population said their financial situation had worsened due to the crisis, while just over 50% said they were concerned about being able to meet expenses.
Even with lockdown restrictions now eased as the infection rate has declined, Israel is looking at a negative growth this year for the first time since 2002. The economy is expected to grow a negative 5.4% in 2020, according to an April 30 Finance Ministry report. This compares with a growth of 3% forecast by the ministry, pre-coronavirus, and a 3.3% growth in 2019.
The recession could be even deeper if there is a second wave of the virus and further lockdowns, the ministry warned. Unemployment this year could reach an average of 13%-14%, the report said, as a drop in local and global consumer demand will deter employers from re-employing workers they have put on unpaid leave.
Israel has confirmed 16,409 virus infections and 245 deaths as of Friday evening.
