How Israeli exit strategy aims to save economy while keeping virus under control

Proposed Finance Ministry plan, which may come into force next week, sees tech, financial and services sectors leading a phased ‘return to normal,’ reassessed at each stage

Shoshanna Solomon

Shoshanna Solomon was The Times of Israel's Startups and Business reporter

Illustrative image of a exit from darkness to light. Israel formulates an exit strategy to salvage economy from coronavirus havoc (Julia Kuznetsova; iStock by Getty Images)
Illustrative image of a exit from darkness to light. Israel formulates an exit strategy to salvage economy from coronavirus havoc (Julia Kuznetsova; iStock by Getty Images)

A plan to get Israel’s economy back on track envisages the gradual easing of some coronavirus social distancing restrictions in specific, predetermined steps, contingent upon continued medical monitoring, immediately after Passover.

The rationale behind the plan led by the Finance Ministry is to get certain businesses deemed important contributors to productivity and employment back to work as soon as possible — the financial sector, tech and service sectors, including accountants and lawyers — while holding back on those that entail the highest health risks, such as closed shopping malls and markets and the hotel industry, and those that have a low impact on economic growth, such as hairdressers and sports and entertainment venues.

Schools — starting with special needs children and pre-kindergarten and kindergarten children — will also be reopened in phases and under strict health guidelines, along with public transportation, which has ground to a near-total halt. Both of these are seen as essential to the resumption of economic activity in Israel, enabling workers to travel to their jobs by bus or train, and to do so without leaving young children alone at home. Israel has more than 384,000 households with children ages 0-9.

If the current virus statistics remain relatively encouraging, some stores in open air shopping centers will also be allowed to resume operations — under strict Health Ministry instructions — from April 19, just after the end of the Passover festival, to help jumpstart consumption and get people spending once again.

Illustrative: Magen David Adom medics wearing protective clothing, as a preventive measure against the coronavirus transfer a patient to the new coronavirus unit at Shaare Zedek hospital in Jerusalem on April 6, 2020. (Nati Shohat/Flash90)

The exit policy aims to find a balance between the needs associated with two catastrophes that are savaging Israel and the rest of the world — the coronavirus pandemic, which has killed, as of April 13, more than 100,000 people worldwide, with over 1.8 million confirmed cases in 210 countries. And the economic disaster: the global economy could grow at just 2.4 percent this year, its slowest rate since 2009, due to the outbreak, according to the Organization for Economic Cooperation and Development (OECD).

In Israel, the virus has caused over 11,000 cases of infection and killed 113 people as of Monday afternoon. The social distancing steps that have been in place to contain the virus have inflicted a “very heavy economic price,” the authors of an inter-ministerial report setting out the exit strategy said. Keeping these measures in place would lead to an “unprecedented hit” to the Israeli economy, they warned.

A balanced risk management program will enable the battle against the virus to continue while releasing much-needed “oxygen to the economy,” the authors of the report said. The exit plan was formulated by Finance Ministry officials together with the Bank of Israel, the Economy Ministry and Israel’s National Economic Council, in conjunction with Health Ministry officials. It has been submitted to Israel’s National Security Council and will be decided upon by Prime Minister Benjamin Netanyahu, after close consideration along with a number of alternative economic plans that have also been formulated.

The social distancing and quarantines imposed in Israel, which saw the shuttering of businesses and stores as people were told to stay home, are already expected to lead to negative growth this year, at unprecedented levels, the report said. Unemployment has surged to over 1 million, or 25%, up from a low of 3.6% before the coronavirus outbreak.

Closed shops and restaurants in Tel Aviv on March 15, 2020. (Miriam Alster/FLASH90)

According to a survey by Israel’s Central Bureau of Statistics, as of March 31, 42 percent of businesses saw an over-50% drop in their revenues in the preceding weeks, while some 50% of businesses said they would shut down all activities if the current situation continued for another month.

Under the proposed exit plan, starting from April 19, 50% of nonessential workers will return to their places of employment by May 3, and all workers will return by the end of May.

The businesses that will lead the way will be those in the tech and financial sectors, service industries like accounting and legal firms, industrial plants, importers and wholesale trade.

All stores, covered malls and markets will be reopened under specific health guidelines by the end of May.

Children in special education frameworks, along with pre-K and kindergarteners will return to class first, under health restrictions and in limited numbers. From May 17, first- to third-graders will return to school, also under health restrictions and in limited numbers.

Israeli preschool students engage in remote learning, March 16, 2020 (Israel Education Ministry Facebook page)

The public will be allowed out to buy all kinds of products, and not just food, immediately after the Passover festival, the proposed framework suggests.

The plan also aims to create a clear and transparent framework for the gradual release of the economy, with steps that are clearly defined and medical targets that must be met — such as low infection rates — before moving on to the next step.

This intends to provide greater certainty for businesses, which will know where they stand regarding timelines and allow them to plan and make the necessary decisions.

It also aims to set out clear health guidelines that will accompany the gradual easing of the restrictions, the authors of the report said. These will instruct schools and public transportation how to resume services while stemming the spread of the virus, for example.

Clear and transparent health indices will enable officials to measure the effectiveness of the battle against the virus: for example, the speed of its spread or the number of people on ventilators. Three days before moving from one economic stage to the next — a total release of the economy is forecast to be from May 17 to 31 — these indices will be monitored. Progress to the next stage will proceed only if the pre-set index targets are met.

Should some of the targets not be met, and the viral outbreak resume its virulence — the proposed plan will be scaled back accordingly, in tandem with on-the-ground developments.

It should be remembered though, that even as the economy’s exit strategy is on the cusp of being rolled out, conditions on the ground remain shaky. Officials in Israel and globally are largely fumbling in the dark to battle an invisible and deadly enemy they have not seen the likes of before. Outcomes, thus, remain uncertain and plans will need to be adjusted constantly to meet demands as they develop. The roll-out of the strategy won’t be easy and huge questions about how things will work in practice will no doubt arise.

Success of the proposed plan will be measured by whether the damage to Israel’s economy is relatively short-term, followed by a quick recovery by the end of this year or the start of next, or if it will be prolonged, and linger for the longer term.

What is also clear is that in addition to this current proposed exit plan, the Finance Ministry and Israel’s economic leadership will likely have to formulate and implement a second plan, one that will go beyond curbing the damage and help jumpstart the economy so it can start chugging along healthily again.

Most Popular
read more: