The prime minister's bureau has started to put together an aid program for business owners who have been harmed by the spread of the Omicron coronavirus variant in Israel.
It is not yet clear what the program will look like, as the Ministry of Finance and Minister of Finance Avigdor Liberman's bureau continued to insist this week that "unless there's a lockdown, there's no reason to pay compensation." Liberman, who until now has received some support from other government ministers for his no compensation policy, is starting to lose it, beginning with Prime Minister Naftali Bennett, his alternate Yair Lapid, and party heads, on whom grass roots pressure is starting to tell.
In the face of the demands from the street, the prime minister's bureau is pushing for a selective aid policy for businesses that have been hit by the latest wave of the pandemic, and fast-tracked legislation allowing payments to self-employed people who have had to go into isolation. Sources inform "Globes" that discussions took place at the beginning of the week between Bennett, Liberman, and Minister of Health Nitzan Horowitz, and that the matter is being coordinated by Prime Minister's Office director general Yair Pines.
In the discussions, the fear was raised that operating a broad compensation policy as in previous waves of the pandemic would lead to "behavioral change" in the economy, and would in practice cause a downturn in economic activity even in the absence of a lockdown. The fear is shared by the prime minister's bureau, but there the desire is to solve the plight of the self-employed.
Government sources say that, despite his declared policy, Liberman "understands the need for compensation". It's not clear whether this is wishful thinking on the part of his coalition partners, but the program being formulated in the discussions between the prime minister and the Ministry of Finance calls for selective aid for owners of banqueting halls and for the culture and entertainment industry, and ad hoc aid for business owners whose businesses have been halted because of restrictions imposed to cope with the pandemic, such as cafeterias in institutions of higher education.
While the problem of the political will has been solved, the question of the legal way of providing aid only to those who have been harmed and not across the board is still under discussion at the professional level.
The government is reportedly rushing through legislation that will put the self-employed and salaried workers on an even footing when it comes to compensation for days in isolation. At present, the state shares the burden of isolation days with employers, but the self-employed are outside the scope of the program. Once the legislation is passed, it will apply retroactively to July 2021.
The rapid spread of the Omicron variant has led the government to give up its attempt to test the entire population, on the grounds that the measure is inefficient, and to conclude that, since that severe morbidity is lower than at the corresponding point in previous waves, there is no justification for a lockdown. This is the assumption behind the "the horse has bolted" approach that the government is taking, but the question arises whether this is not a gamble on the part of the decision makers, when, although the spread of the Omicron variant did not affect economic activity in the last quarter of 2021, it could have a negative effect in the first quarter of 2022.
Mobility data from Google indicate that Israelis have not become much less mobile, but credit card purchases have fallen sharply in the past two weeks, and the peak of the wave is yet to arrive.
According to the forecast by Ministry of Finance chief economist Shira Greenberg, the cost to the economy of the restrictions currently in force is NIS 320 million a week, but that figure does not include the cost of days in isolation. The Ministry of Finance's estimate is that the economic cost will reach NIS 175 million a week for every 100,000 people in isolation, or NIS 875 million a week if 500,000 people are in isolation.
So far, the Ministry of Finance has preferred not to put its hand in its pocket, but to introduce ad hoc relaxations. For example, the ministry has extended a temporary ordinance, allowing people to continue to claim unemployment benefits during 2022 at the same time as receiving a senior citizen's allowance, a disability allowance, income supplement, or alimony. The ministry is also formulating an aid plan for the aviation industry.
Despite the spread of the Omicron variant, the Bank of Israel's growth forecast is fairly optimistic. According to the central bank's forecast, unchanged since October 2021 and reiterated in its latest interest rate announcement, GDP will grow by 5.5% in 2022. The Bank of Israel assumes that the current wave of the coronavirus pandemic will pass quickly, and that the number of people having to spend time in isolation will impact economic activity to a similar extent as in the third wave, slicing 0.5% off GDP.
Published by Globes, Israel business news - en.globes.co.il - on January 10, 2022.
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