Treasury sees zero growth this year at best

Shira Greenberg  photo: Matan Portnoy

Ministry of Finance Chief Economist Shira Greenberg estimates that the measures to combat coronavirus announced so far will cut NIS 45 billion from GDP.

Economic growth in Israel will be zero this year as a result of the coronavirus, assuming that no further steps are taken extending the shutdown of the economy.

According to updated assessments at the Ministry of Finance, the effects of the measures instituted in Israel and around the world so far will lop 3% (some NIS 45 billion) off GDP. Since the original forecast for 2020 was 3% growth in GDP, the new assessment means approximately zero growth. This assessment is, however, based on the situation as it was yesterday evening, whereas the Ministry of Finance believes that it is almost certain that further measures will be introduced in the next few days that will worsen the impact on the Israeli economy.

The government decided yesterday evening not to impose a complete lockdown as demanded by the Ministry of Health, and instead to put the public sector on an emergency footing, to limit the number of people in workplaces in the private sector, and that vital services would continue operating normally.

Ministry of Finance Chief Economist Shira Greenberg estimates that the measures announced yesterday and on Saturday night to combat the spread of the coronavirus will depress GDP by about NIS 2.5 billion (1.6%). This is on the assumption that the partial lockdown lasts for five weeks.

The estimates are also based on the measures currently in force in other countries, while every day brings more stringent measures around the world that increase the economic impact of the pandemic. On the basis of the steps taken globally up to March 13, Greenberg estimates that the effect on the local economy in 2020 will be a NIS 20 billion loss of GDP, or 1.4%. The assumption is that the crisis in the global economy will continue for several months.

Greenberg therefore estimates the loss of growth in the Israeli economy as expected so far at 3%, which will mean a loss of state revenues of 1.2%. The Ministry of Finance stresses that there is great uncertainty about how the coronavirus will spread and how it will affect the global and local economies, and that its estimates will be continually updated.

It is estimated that the decision on payment of unemployment benefit to employees on unpaid leave will cost NIS 4 billion monthly.

Published by Globes, Israel business news - en.globes.co.il - on March 17, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

Shira Greenberg  photo: Matan Portnoy
Shira Greenberg photo: Matan Portnoy
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