The Manufacturers Association of Israel has appealed for government assistance to support the private sector amid the novel coronavirus (COVID-19) outbreak, warning the financial impact threatens the survival of some businesses.
In a letter sent to Finance Minister Moshe Kahlon on Wednesday, Manufacturers Association president Ron Tomer called on the government to establish a “financial safety net” for private businesses suffering from the consequences of the outbreak.
“The coronavirus continues to spread, unfortunately, and the impact on the global and Israeli economy is already beginning to reveal itself,” he wrote. “As the time required to eradicate the virus grows longer, the economic impact grows exponentially.”
As a consequence of the outbreak, businesses are facing a shortage of raw materials, delays in supplies, reduced cargo flights, a lack of clarity in the shipping sector and the impact of declining production in China and other countries, Tomer said.
The association highlighted a series of possible “financial safety net” measures to support businesses, including state-backed guarantees and credit insurance for companies currently struggling with cash-flow issues.
“The spread of the virus has created a dramatic and sudden change for many companies, and there is real concern that important activities that contribute to growth and employment cannot cope independently with the current crisis,” Tomer said. “Therefore, state intervention and assistance are now greatly required to help industry and the entire business sector to withstand the temporary difficulties and challenges until the economic system stabilizes and current uncertainty is significantly reduced.”
Tomer cited financial difficulties experienced by El Al due to travel restrictions and falling demand, warning that a “severe blow” to the flag carrier will impact the ability of domestic manufacturers to export and import goods. Earlier this week, Transportation Minister Bezalel Smotrich said El Al has incurred losses of approximately $50 million due to flight cancellations.
According to a report published by commercial analytics firm Dun & Bradstreet on the business impact of the coronavirus, the effect of the outbreak on the Chinese economy could cause a “drag of approximately one percentage point on global GDP growth” if containment of the virus is delayed beyond the summer of 2020.
At least 51,000 companies worldwide have one or more direct or Tier 1 suppliers, and a further five million companies have one or more Tier 2 suppliers, in 19 Chinese provinces most heavily impacted by the virus outbreak. More than 90% of businesses with direct impact to their supply chains are headquartered in the United States.