by Nick Kolyohin
JERUSALEM, Aug. 19 (Xinhua) -- Israeli economy falls into a recession, which was badly hurt by the COVID-19 pandemic, said experts, leading to limitations on movement and increasing unemployment.
The Israel Central Bureau of Statistics (ICBS) released on Monday labour force survey data, according to which the unemployment rate in the country increased during July to almost 12 percent, which represents roughly half a million people.
According to the latest data of the Israeli Employment Service, the number of unemployed in the country is much higher, reaching almost 900,000 people.
Davey Disatnik, a senior faculty at the Coller School of Management in Tel Aviv University and a founder of a private hedge fund, said "Israeli Ministry of Finance didn't understand the severity of the crisis."
He believes that the Israeli government made a mistake when pledged to compensate all the people who lost their jobs with one year of unemployment benefits up to 70 percent of their previous wage.
In some countries, said Disatnik, governments pay a portion of unemployment benefits, and employers add a completion percentage of salaries to workers who stay in part-time jobs and receive more money than unemployed eventually.
On Sunday, ICBS released a report that in the second quarter of 2020, the gross domestic product (GDP) of Israel contracted at an unprecedented annual rate of 28.7 percent.
Yael Hadass, academic head of economics at the Raphael Recanati International School of the Interdisciplinary Center Herzliya, said "it means that if this trend continues at the same pace, Israeli GDP of 2020 will fall by 28.7 percent compared to the GDP in 2019."
In the Great Depression, for example, the GDP of the U.S. dropped about 30 percent over four years (1929-1933). The GDP measures the monetary value of goods and services produced in a country during a given period, she explained.
In the first quarter of 2020, the annual rate of GDP contraction was 6.8 percent due to the coronavirus crisis that started during March in Israel, stated ICBS.
The current contraction of the economy is the highest in the last forty years at least and was caused by the coronavirus crisis and the government's steps to halt it, according to ICBS.
The decrease in the economy brings Israeli GDP back to the level of the fourth quarter of 2016. It happened, among other things, as the number of permitted employees in the workplace was severely limited by the governmental restrictions.
At the peak, in some places, the workforce was limited up to ten percent only, and many industries were completely shot down, part of them until today.
During the second quarter of 2020, according to ICBS, there was a decrease of more than 40 percent in private consumption and imports of goods and services.
Israel is suffering from very high numbers of COVID-19 cases that could lead again to lockdowns. "If Israel goes again to lockdown, it will be very bad to the economy," Disatnik told Xinhua.
Israel's Prime Minister Benjamin Netanyahu held Tuesday a meeting to discuss economic trends, continued assistance to the economy, and the acceleration of the economy.
Netanyahu requested that additional plans on returning workers to the employment cycle and on accelerating the economy be submitted forthwith.
Netanyahu said Sunday that the ICBS statistics actually show that "Israel's decline is half the decline in the European states, and it is almost the lowest in the world."
"This is the result of the responsible policy that we have undertaken, which not only reduced the number of deaths, but also the magnitude of the blow to the Israeli economy," he added.
However, the Bank of Israel has a less optimistic view of the economy. It published last Tuesday a report, saying there is a medium-high risk to the financial stability of Israel.
The main hazard to the economy is an increase in infections leading to limitations on movement and lockdowns. The crisis severely affected the weakest populations in the labor market.
Nevertheless, the Israeli economy and banking system was in good shape at the beginning of the coronavirus outbreak, as well as a low unemployment rate.
The current crisis is also an opportunity for new businesses to emerge, for companies to utilize their procedures, for technology to improve the line of work, some experts said. Enditem
