Finance Ministry: Economy may need five years to recover from crisis
The report forecasts two possible scenarios: One in which the country manages to dance with the virus and one in which there are extreme spikes in morbidity.
By HAGAY HACOHENJerusalemites wearing face masks for fear of coronavirus walk on Jaffa road in the City Center of Jerusalem on July 12, 2020. Israel has seen a spike of new COVID-19 cases, cabinet ministers imposed new restrictions on public gatherings in a bid to stem the rising infection rate of the coronavirus(photo credit: OLIVIER FITOUSSI/FLASH90)
It may take four or five years for the economy to recover from the coronavirus crisis, according to a new report by the Finance Ministry.It said there were two possible scenarios: Either the country manages to live with the virus, or there are extreme spikes in morbidity.Assuming that Israel’s recovery from the coronavirus crisis is somewhere in between the dot-com crash of the early 2000s and the 2009 global financial downturn, the Finance Ministry predicts Israel’s GDP will shrink 5.9% by the end of 2020 and grow 5.7% in 2021.However, if there is a more extreme crisis than expected, the impact on financial growth will be greater and the rate of recovery will be slower, with GDP shrinking 7.2% in 2020 and growing 2.2% in 2021.More than one million Israelis have been out of work or furloughed since the start of the coronavirus crisis. Ten percent of Israelis will be out of work at the end of the year in the best-case scenario and 15% in the worst-case scenario, the report said.The unemployment rate in Israel was 4% at the start of the crisis.Structural changes in the labor market might lead to a “jobless recovery,” meaning that even if the larger economy does recover, this will not necessarily translate into more jobs, the report said. It also could mean that the country’s spending level will not return to its level before the pandemic in the near future, it said.Certain industries are expected to experience the greatest negative impact, while others will be less impacted, the report said. The most impacted industries will be low-tech exports and tourism, it said.Foreign tourism is at its lowest point ever, the report showed, with fewer than 1,000 tourists entering the country after January. The tourism industry likely will not return to its previous condition by the end of the year, and those who work in it should explore other lines of work, the report said.Regarding hi-tech, there was a 50% drop in successful sales of Israeli start-ups so far this year compared with 2019, the report said.Production levels fell 6.9% in the first quarter of 2020, the biggest drop in recent decades. However, production of various items remained unchanged, with the expectation that the COVID-19 restrictions will be lifted, the ministry said.The Finance Ministry expressed concern that Israelis may invest less because of the increased instability of the marketplace.The coronavirus is volatile, and the predictions outlined in the report could change, the Finance Ministry said.
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