Surpassing the most dire economic forecasts on the effects of the coronavirus pandemic, Israel’s gross domestic product plunged by 28.9 percent in the second quarter of 2020, as compared to the first quarter, in the worst economic downturn in over 40 years, according to an official estimate Sunday.
The projections by the Central Bureau of Statistics, which will likely be slightly adjusted over time, came as Prime Minister Benjamin Netanyahu announced the government would inject billions more into the economy to create jobs and bail out hotels.
The CBS figures also indicated that Israeli GDP slid by 7.8% compared to the second quarter of 2019. Private consumption shrunk by over 43%, due to the lockdown measures imposed throughout March and April, and imports dipped by over 41% as a result of the virus, the CBS said.
The recession marks the steepest contraction of Israel’s economy since at least 1975, and possibly ever, Hebrew-language media reports said.
Netanyahu, during a weekly cabinet meeting, downplayed the spiraling crisis and claimed the contraction was “almost the lowest in the world.”
“We just received very good economic news. The Central Bureau of Statistics published that the decline in our GDP in the second quarter of 2020 was 7.8%, which is half the decline in the European states; it is almost the lowest in the world. South Korea is ahead of us and maybe two or three other countries,” added Netanyahu.
“This is the result of the responsible policy that we have undertaken, which not only reduced the number of deaths in Israel, but also the magnitude of the blow to the Israeli economy,” he continued. “We will continue to work for your livelihoods, for our economic future and for your health.”
“In the cabinet, we have just approved an additional NIS 8.5 billion in incentives for our economy and to create jobs. I know that there is still great economic distress – we are working around the clock to make things easier for you, citizens of Israel,” he said.
The cabinet also approved a NIS 300 million ($88 million) aid package Sunday for hotels.
Opposition leader Yair Lapid blasted Netanyahu over the economic projections, saying it proved the Likud leader was a “total failure” in managing the crisis.
“The serious contraction is not a matter of fate. All countries have the coronavirus. The discrepancy in the figures is a startling testament to Bibi’s [Netanyahu’s] total failure in managing the crisis. We are headed toward a disaster. People will lose their apartments, businesses and income,” said Lapid. “We need a small, efficient government that will handle the economic crisis.”
As the coronavirus outbreak hit Israel, the country was put into a lockdown in mid-March that all but brought the economy to a standstill. Unemployment rocketed from around 5% to 26%, and by April, over a million Israelis were unemployed.
Although the lockdown measures were mostly rolled back in recent months, unemployment is over 21%, according to the Employment Services figures last week, with nearly 882,000 people out of work.
The government has approved billions in aid for battered businesses and sent stimulus checks to most Israelis in efforts to revive the economy.
But the country also does not have a yearly state budget, amid a fight between Netanyahu and coalition partner Benny Gantz over whether to pass a one-year budget for 2020, or a two-year plan through 2021, as stipulated in their coalition agreement.
Earlier this month, the Finance Ministry said it may take up to five years for the Israeli economy to fully recover from the shock it received during the coronavirus pandemic.
In its forecast for 2020-2023, the ministry offered two distinct paths that the economy could take in the coming years, one in which the pandemic is brought under control, leading to a gradual improvement in Israelis’ economic circumstances, and another in which a rise in coronavirus deaths requires the reimposition of economic restrictions, hampering recovery.
Should the pandemic stay largely under control, allowing for the economy to revive, the ministry projected the GDP will shrink by 5.9% in 2020, followed by 5.7% growth the following year. In this scenario, unemployment would remain around 9.7% at the end of the year, it projected.
However, in the event of an exacerbation of the public health crisis causing increased economic restrictions, unemployment would rise to 15% by the end of the year and the GDP would contract by 7.2% in 2020 and only rise 2.2% in 2021.
In either case, a full economic recovery would probably take around half a decade, and certainly will not occur before 2023.
Israel has seen over 92,000 COVID-19 cases and 679 deaths.