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When you are told after the closure that the economy is recovering - do not believe it

From the previous and current quarantine, mainly those with low incomes are harmed, so after the quarantine is released, the other people spend more and the economy looks good.

The government will try to present this as an achievement - here's what they will not talk about

Tags

• Corona

• Ministry of Finance

• financial crisis

Avichai Snir

Friday, 18 September 2020, 00:09

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In the video: The restaurateurs' protest against the closure (Editing: Itai Amram)

It is estimated that the economy has lost about 7.5% of GDP since the beginning of the crisis so far, meaning that instead of ending with a growth of 3%, 2020 is expected to end with a negative growth of 4.5%.

This means that on average, each of us lost almost 20,000 shekels.

In terms of average wages, that means each of us has lost about two salaries.

Assuming that apart from the quarantine during the holidays we will not have another quarantine this year, and that this quarantine will not last beyond three weeks, each of us will lose another half average average salary.

Losing two and a half salaries is a lot, even a lot - on average, each of us has lost about one-fifth of his annual salary.

Therefore, it is somewhat surprising that the tourism industry has recovered relatively quickly from the previous closure.

As they released us from quarantine, the Israelis returned to B & Bs and hotels, and if only it were possible to fly, the air would also be full of Israelis going on vacation around the world.

So if each of us lost 20% of our salary, where did people get so much money for recreation?

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The answer is that looking at the averages is very misleading.

The Ministry of Finance, loyal to the school of infiltration, targeted the first closure on those with relatively low incomes.

Those who closed were shops, service providers, etc. - businesses that even in normal days their revenues are volatile and relatively low.

Workers with stable and higher wages were hardly injured.

The industry continued to work.

The high-tech kept working.

Civil servants continued to receive wages.

Therefore, what happened is that 60% -70% of the population were hardly affected by the quarantine.

The remaining 30%, lost all their income.

More than that: those whose income was not harmed by the closure, even managed to save because of it.

People saved expenses on fuel, vacations, clothes, sitting in restaurants and cafes, and so on.

So as soon as the quarantine ended, the group that was not harmed by the quarantine had a lot of money to go out and spend, and Eilat, for example, felt it well.

Those who lost their jobs (or their business) did not participate in the celebration, of course, but that did not bother so much, because even on ordinary days these are the people who can least afford to spend money on "luxuries."

And more need to repay loans

So I expect the finance minister and the prime minister to be quick to pat themselves on the back, saying that although the economy has shrunk by 4.5-5 percent, one can be proud of how the economy is recovering, and that one can hope that the coming years will be better

Since the second closure is also targeted at the same population group, so assuming it does not last too long, one can expect that once it is over, the group that exploits closures to save will spend relatively much once the closure is over.

This means that from the point of view of finance, macroeconomics will look relatively good for an economy that has been closed for almost three months in one year.

So I expect the finance minister and the prime minister to be quick to pat themselves on the back, saying that although the economy has shrunk by 4.5-5 percent of GDP, one can be proud of how the economy is recovering, and one can hope that the coming years will be better.

They will forget to tell two things.

The first, is that as long as the uncertainty persists, those thirty percent who have lost their income will have a very hard time finding work.

This means that while the majority of the population will maintain its income, there will be a significant portion of the population that joins the cycle of poverty, and it will not be so easy for it to get out of there.

The second thing is that the government took out a lot of loans to finance its activities during the corona period.

These loans someone will have to repay, and there are two ways to do it.

The first is to further reduce the services that the government provides to the public (let me guess that they will not reduce the defense budget), which means that those who pay, are mainly those who have lost their livelihoods.

The second option, to impose taxes on those whose income is barely harmed by the corona, which will hit quite hard on the recovery of the economy.

But maybe we'll be lucky and find a third way too.

Who knows, maybe next year life will be so good that all we have to do is sit on the porch and count migratory birds?

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