The coronavirus could cause up to a one percent drop in Israel’s economic output, the Finance Ministry estimated on Monday, as stocks around the globe plummeted over fears surrounding the outbreak.
The ministry estimated that the epidemic is likely to cause at least a quarter of a percent in damage to the economy. The expected shortfall amounts to between NIS 3.6 billion ($1 billion) and NIS 14 billion ($4 billion).
The estimates do not include the possibility of a “nightmare scenario” of a widespread, destructive outbreak in Israel, the Globes business daily reported.
Israel has so far managed to mostly avoid the virus, with the only cases confirmed so far occurring in nationals who were aboard a cruise that became an incubator for the disease. But the country has also pushed hundreds of people into home quarantine and taken strict measures to prevent the entry of foreigners from a slew of mostly Asian countries, including halting flights.
Finance Minister Moshe Kahlon convened an emergency meeting on the virus on Monday in Jerusalem, holding talks with finance authorities and the Bank of Israel.
Shira Greenberg, chief economist for the Finance Ministry, said that macroeconomic activity has not been affected by the virus outbreak. But the ministry has received reports from companies of potential damage from the virus, and some major companies have reported losses already.
Transportation Minister Bezalal Smotrich said last week that El Al Airlines already lost $50 million due to the crisis.
A budget official said that the Health Ministry is likely to see a significant increase in expenses due to the virus. Government budgets are currently frozen due to the year-long political stalemate, and fears have also arisen that the virus could chill turnout when Israelis go to the polls next week.
Prof. Amir Yaron of the Bank of Israel said at the meeting that if the crisis continues and hits more countries, and Israel is forced to take more severe preventative measures, the economic impact will be significant, but difficult to estimate.
Tourism in particular is likely to see a decline, and fewer foreigners will visit Israel, which has already closed its borders to residents of China, South Korea and elsewhere.
Kahlon ordered an internal Finance Ministry team set up to monitor virus-related developments.
Israeli trading partners, including China, are likely to suffer a significant hit to their economies due to the virus, which could in turn affect Israel. Uncertainty and fear could curb investments, and workers could be kept home due to illness or quarantines.
On Monday, virus fears sent the first serious shiver through stock markets since the start of the outbreak, sinking indexes across the globe.
At the Tel Aviv Stock Exchange, the TA-35 index dropped 1.42% Monday, and the TA-125 index fell 1.67%.
US stocks also nosedived , with the Dow Jones Industrial average plummeting 3.56%, and the S&P 500 falling 3.3%, both recording their biggest daily losses in two years.
The sell-off continued early Tuesday in east Asia. Japan’s Nikkei 225 index lost 3%, to 22,686.61 after it reopened from a holiday on Monday. Hong Kong’s Hang Seng edged 0.2% lower to 26,777.88 and the Shanghai Composite index sank 1.6% to 2,984.19. In Australia, the S&P ASX/200 shed 1.2% to 6,896.10.
Despite the worries, the bank said Monday that its interest rate would remain at 0.25%. The next interest rate decision is set for April 6.
The Bank of Israel’s latest growth forecast, published in January, predicted economic growth of 2.9% by the end of the year.