Tel Aviv Stock Exchange jumps, shekel gains ground following bank intervention
Unemployment hits historic highs, with up to 7,000 Israelis filing per hour; S&P global rating agency predicts global recession, but says Israel on good footing
Luke Tress is a JTA reporter and a former editor and reporter in New York for The Times of Israel.
The Tel Aviv Stock Exchange finished the week in the black but jumped several percentage points in Thursday trading to recoup some of its losses.
The TA-35 index climbed 4.1% on Thursday, with banks up 8.1%, real estate up 7.4% and gas and oil companies up 11.6%.
The exchange fell overall this week, but losses were less severe than in recent weeks. The TA-35 index was down 1.7% for the week, with banks down 6.1%, real estate down 11.4%, and oil and gas down 12.6%.
The TA-35 index has plummeted 28.22% in the past month. The coronavirus pandemic has bludgeoned global markets as spending is curtailed by government restrictions, closed businesses, limited movement, consumer fears and plummeting equities.
The US stock market also saw small gains on Thursday, with the S&P 500 up 0.77% in Thursday afternoon trading. The New York exchange has seen historic losses in recent weeks, with the S&P down over 28% in the past month. The markets this week dropped below their value when US President Donald Trump took office in January 2017.
The shekel gained ground on Thursday after a major intervention from the Bank of Israel Wednesday when it vowed to allocate up to $15 billion for swap transactions between currencies for domestic banks. The move is meant to boost liquidity in the foreign exchange market and support the shekel as it slides in value against the dollar amid global economic turmoil.
The shekel gained 3.8% against the dollar, and 5.2% against the euro. One dollar is now worth NIS 3.68, and one euro worth NIS 3.98.
Before the Bank of Israel intervention, Israel’s banking sector had seen a shortfall of dollars. The shekel dropped in value against the dollar by about 10 percent earlier this month.
The shortage of dollars is partly due to international firms withdrawing funds to other countries.
The Bank of Israel and retail banks also announced measures on Sunday to mitigate damage to the economy, offering a delay in mortgage payments for a few months, loans to small and mid-sized businesses that are seeing liquidity problems, expanded digital services for remote transactions, and courier services for customers in quarantine, among other steps.
Meanwhile, March is likely to be the worst month in Israel’s history for unemployment. Some 330,000 Israelis have filed for unemployment this month as of Thursday morning, with up to 7,000 filing every hour, the Calcalist business daily ported.
The number of unemployment filings is already 13 times higher than it was last month. Eighty-six percent of the newly-unemployed were on unpaid leave, 9% were fired and 2% quit.
The Employment Service expects 400,000 newly unemployed people by the end of March. The cost of unemployment benefits in April is expected to be NIS 2 billion ($523 million), seven times higher than current costs, which are NIS 800 million-NIS 900 million ($209 million-$235 million) per month.
The National Insurance Institute expects to see between 500,000 and 1.2 million Israelis unemployed due to the crisis, National Insurance Director Meir Shpigler said Wednesday.
The estimates mean an unemployment rate of non-self employed Israelis of between 13% and 32%.
Before the crisis, the service supported some 80,000 people on average.
It’s unclear if the average payment per person will change.
In a bit of good news for Israel’s economy, the Standard & Poor’s global credit rating agency on Thursday said that Israel is likely to weather the storm and fare better than other economies. The agency said that Israel’s pre-crisis growth forecast for the year of 3% was higher than European countries, and that the weakening shekel would boost the country’s exports.
The agency predicted Israel’s GDP falling to around 2% growth, a more rosy assessment than Israel’s Finance Ministry, which forecast 0% growth for 2020. S&P noted that an additional blow to the domestic economy, such as a major geopolitical event or a real estate market collapse, could tip Israel into a more severe downturn.
S&P predicted a global recession due to the pandemic, with annual GDP rising 1%-1.5%. A recession is defined as a decline in economic growth for two or more consecutive quarters.
China was hit much harder by the crisis than expected, but is likely beginning to stabilize, the agency said.
Europe and the US are on a similar path as social distancing causes a collapse in consumer demand, S&P said. The agency predicted a global recovery beginning later in 2020.
The Finance Ministry estimated Monday that the total damage to Israel’s economy caused by the pandemic will amount to NIS 45 billion ($12 billion) and wipe out any projected growth for the year.
The estimate came after Prime Minister Benjamin Netanyahu announced new restrictions to stem the virus outbreak on Monday night, and before the Health Ministry announced new more drastic measures on Tuesday.
The government on Monday ordered all businesses with more than 10 people to curb in-office staff by 70% and put the public sector on emergency footing, adding to measures that had already largely curtailed much of Israel’s economy.
Major employers released most of their staffs this week, including El Al, which put 5,500 workers — over 80% of its staff — on unpaid leave, and Castro, Israel’s largest clothing chain, which put 6,000 on unpaid leave.
The widened restrictions came after the Health Ministry voiced support for a total lockdown of the country. Treasury officials, by contrast, have been strongly opposed to a full shutdown.
Israel has introduced a series of sweeping restrictions since the coronavirus outbreak began, requiring all Israelis returning to the country to self-quarantine for 14 days and barring foreigners. It also shut schools, cafes, malls, gyms and more.
On Tuesday, widening the restrictions, the Health Ministry told Israelis not to leave their homes or visit parks and beaches, with exceptions made for essential needs, like food shopping, medicine shopping, medical care and work.
As of Thursday morning, there have been 529 confirmed COVID-19 cases in Israel, six of them in serious condition.
