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Bank of Israel on the corona year: the state has had difficulty in assisting businesses, the damage - four times as much as in 2008
In the first chapter of the special report dealing with the analysis of the economy, the response of the slow government regarding the assistance programs for the self-employed was noted in the negative.
However, the report shows that the intensity of the damage to the Israeli economy was moderate compared to developed countries
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Wednesday, March 31, 2021, 12:00 p.m.
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The Bank of Israel published today (Wednesday) the first chapter of the special report on economic analysis in the context of the corona plague.
The report criticizes the slow government response to self-employment and small business assistance programs, and at the same time shows that the intensity of harm to the Israeli economy has been moderate compared to developed countries.
The Bank of Israel also recommends in the report that it take advantage of the current crisis to increase productivity in the labor market, inter alia, through a "government policy for an intelligent incentive to work from home."
The report also stated that "increasing investment in the economy and in particular in infrastructure, especially in infrastructure for public transportation, is also required in order to increase productivity in Israel."
In the last two decades before the corona crisis, two powerful economic crises befell Israel - the 2001-2003 crisis and the 2008 crisis. The Bank of Israel emphasizes that the corona crisis is the strongest of the three crises: the cumulative damage from the first year of the corona crisis (5% of GDP) is four times greater From that of the entire 2008-2009 crisis and is similar to the damage accumulated over two years in the 2001-2003 crisis.
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Take advantage of the current crisis to raise productivity in the labor market.
Shops closed during the Corona (Photo: Sapir Levy)
The exceptional intensity of the harm to private consumption, which fell by 9.5%, is one of the unique characteristics of the current crisis and was the "focus of the shock."
Although disposable private income rose this year, the severity of restrictions imposed on activity led to a sharp decline in private consumption compared to other countries.
According to the report, exports played an important role in mitigating the impact of the crisis that shook the economy, mainly due to the continued rapid growth of advanced services exports.
GDP fell by 2.5% in 2020, and unemployment has soared to the highest rate in the last 50 years.
"Despite the intensity of the crisis, its impact focused on certain industries, and did not spread to a downward spiral of the entire economy. Despite the panic that initially gripped the financial markets, the real crisis did not develop into a financial crisis, thanks to monetary policy tools at the time."
Exports played an important role in mitigating the injury.
Governor of the Bank of Israel Amir Yaron (Photo: Government Press Office)
However, the Bank of Israel notes that the damage to employment was much more severe than the damage to GDP.
Many workers were laid off, and widespread unemployment soared to an average of 15.7% annually. The harm to the employment of low-wage workers was particularly severe because the multiplicity of these workers in the industries suffered the most damage to activity. It was especially difficult to raise credit before state-guaranteed funds were activated.
It was also noted that the harm to the employment of young workers was greater than to the employment of other workers, a phenomenon also known from previous crises in Israel. The harm to older workers (55-65) was smaller than in younger workers. .
with regard to farm aid package that the bank's economists wrote a considerable S"sikol survival ballet also need help many households get through the period in light of the severe livelihood: employees were laid off or unpaid leave, and the activities of independent business owners paralyzed or severely damaged. "
"Business owners' activity was silenced or severely damaged."
"Clearance sale" sign in a store in Tel Aviv (Photo: Erez Michaeli)
Measures regarding unemployment and sickness benefits, grants for the self-employed and direct assistance to businesses, such as property tax rebates and fixed expenses grants, focused on those directly affected by the restrictions on activity. However, only a few steps were taken, especially towards the end of the year.
It was also written that no significant use was made of expanding public investment as a means of increasing demand.During the crisis, a number of horizontal assistance packages were introduced, such as grants to all citizens, and as such were ineffective in targeting aid to victims of the crisis.
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