The Bank of Israel has cut its economic growth forecast for the Israeli economy this year to 2% because of the effects of the coronavirus pandemic, but sees growth rebounding to 3.9% in 2021, and compensating for the damage in 2020.
The central bank has updated its basic scenario, after earlier scenarios were based on the assumption that the disease would not become a global pandemic. The updated scenario assumes that there will not be a mass outbreak of coronavirus in Israel, and that the whole crisis will be over by the end of June. The bank does nevertheless assume that some 150,000 Israelis will be in isolation at some stage during the period of the crisis, and that a partial closure will be imposed on Judea and Samaria (the West Bank). The bank also assumes that tourism, civil aviation, and other activities such as conferences, will be almost entirely paralyzed during the period.
A statement released after a meeting between the Governor of the Bank of Israel Amir Yaron and the heads of the commercial banks says that on the basis of developments so far, and on the assumption that the incident is over by the end of the second quarter, a 0.7% hit can be expected to GDP growth this year. "Once the spread of the virus is halted, GDP can be expected to return to the pattern that prevailed before the crisis, and this will manifest itself in a temporary growth spurt. The speed of recovery will be affected by policy measures applied during the crisis to moderate its damaging effects."
At the same time, the central bank stresses that "this is a developing situation, and there is great uncertainty over how the virus will continue to spread and the consequences of that for economic activity globally and in Israel, which will affect the degree of impact on economic growth."
Published by Globes, Israel business news - en.globes.co.il - on March 9, 2020
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