Overwhelmed by the worst economic forecasts for the effects of the coronavirus pandemic, Israel’s gross domestic product fell by 28.9 percent in the second quarter of 2020, compared to the first quarter, in the worst economic decline in more than 40 years, according to an official estimate Sunday.
The Central Bureau of Statistics’ projections, which are likely to be slightly adjusted over time, came when Prime Minister Benjamin Netanyahu announced that the government would inject billions more into the economy to create jobs and reimburse hotels.
The CBS figures also indicate that Israeli GDP slipped by 7.8% compared to the second quarter of 2019. Private consumption shrank by more than 43%, due to the closed measures imposed in March and April, and imports dip by more than 41% as a result of the virus, CBS said.
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The recession marks the steepest recession in Israel’s economy since at least 1975, and possibly ever, Hebrew-language media reports have said.
Jerusalemites wear face masks for fear of walking and shopping at Mamilla Mall in the Old City of Jerusalem on August 10, 2020. (Olivier Fitoussi / Flash90)
Netanyahu, in a weekly cabinet meeting, downplayed the escalating crisis and claimed that the shrinkage was “almost the lowest in the world.”
“It simply came to our notice then. The Central Bureau of Statistics published that the decline in our GDP in the second quarter of 2020 was 7.8%, which is half of the decline in the European states; it is almost the lowest in the world. “South Korea is ahead of us and maybe two or three other countries,” Netanyahu added.
Prime Minister Benjamin Netanyahu discusses the Israel-UAE standardization contract at the PM’s office in Jerusalem, on August 13, 2020. (Yonatan Sindel / Flash90)
“This is the result of the responsible policy we have taken, which has not only reduced the number of deaths in Israel, but also the scale of the battle for the Israeli economy,” he continued. “We will continue to work for your existence, for our economic future and for your health.”
“In the cabinet, we have just approved an extra 8.5 billion extra incentives for our economy and created jobs. “I know there is still a great economic need – we are working around the clock to make things easier for you, citizens of Israel,” he said.
The cabinet also approved a $ 300 million ($ 88 million) aid package for hotels on Sunday.
Opposition leader Yair Lapid blasted Netanyahu over the economic projections, saying it proved the Likud leader was a ‘total failure’ in managing the crisis.
“The serious shrinkage is not a matter of fate. All countries have the coronavirus. The discrepancy in the figures is a surprising testament to Bibi’s [Netanyahu’s] total failure in managing the crisis. We’re on our way to disaster. People will lose their apartments, businesses and income, ”said Lapid. “We need a small, efficient government that will deal with the economic crisis.”
Israelis wear face masks to protect against coronavirus, shop at Mahane Yehuda Market in Jerusalem on July 21, 2020 (Olivier Fitoussi / Flash90)
When the outbreak of coronavirus in Israel hit the country in mid-March, everything but the economy came to a standstill. Unemployment rises from about 5% to 26%, and in April more than a million Israelis were unemployed.
Although exclusion measures have mostly been rolled back in recent months, unemployment is more than 21%, according to employment service figures last week, with nearly 882,000 people out of work.
The government has approved billions in support of abused companies and sent stimulus checks to most Israelis in an attempt to rebuild the economy.
But the country also does not have an annual state budget, amid a dispute between Netanyahu and coalition partner Benny Gantz over whether to pass a one-year budget for 2020, as a two-year plan through 2021, as set out in its coalition agreement.
Earlier this month, the Ministry of Finance said it could take up to five years for the Israeli economy to fully recover from the shock it received during the coronavirus pandemic.
In its forecast for 2020-2023, the ministry has outlined two distinct paths that the economy could take in the coming years, one in which the pandemic will be brought under control, leading to a gradual improvement in Israelis’ economic conditions, and another in which an increase in coronavirus deaths requires the repositioning of economic constraints, and repairs the obstruction.
People at the Mahane Yehuda Market in Jerusalem After Reopening According to New Government Orders, May 7, 2020. (Olivier Fitoussi / Flash90)
If the pandemic remains largely under control, allowing the economy to recover, the ministry projects GDP to shrink by 5.9% in 2020, followed by 5.7% growth next year. In this scenario, unemployment would remain around 9.7% by the end of the year, it projected.
In the event of an increase in the public health crisis causing increased economic constraints, unemployment would rise to 15% by the end of the year and GDP would increase by 7.2% in 2020 and only 2.2 in 2021. % up.
In either case, a full economic recovery would probably take about half a decade, and certainly will not occur until 2023.
Israel has seen over 92,000 COVID-19 cases and 679 deaths.
