Israel Eyes Nearly 50% Surge in Aid to Combat Virus Fallout
Israel Eyes 14 Billion Shekel Boost to Economic Relief Package
(Bloomberg) -- Israel’s government is looking to boost its economic aid to businesses and workers clobbered by the coronvairus outbreak by as much as 14 billion shekels ($3.8 billion), a surge of almost 50%, according to two people familiar with the matter.
The government has already put into effect crisis measures worth about 29 billion shekels over the past two weeks, largely composed of government-backed loans and payment deferrals. Under pressure to do more, Prime Minister Benjamin Netayahu asked officials on Sunday to come up with an “extensive and significant relief package.”
The latest aid may include a payroll tax reduction and be financed partly by cutting salaries of highly paid public sector employees, according to the people, who asked for anonymity because the plan isn’t public yet.
A Finance Ministry spokeswoman declined to comment.
Governments around the world have announced hefty relief packages as the virus batters markets and economies. But Israel, which has more than 1,650 cases and one death, has had to constrain its fiscal firepower because three inconclusive elections have left it without a permanent government since December 2018 -- and no updated 2020 budget.
In the meantime, though, it’s imposed stringent containment measures that have shut down parts of the economy. The joblessness rate has more than quadrupled to 18.6% as businesses retrench and the Finance Ministry is forecasting zero growth, if not a contraction, this year.
The newest package of proposals is still being discussed, and the people familiar with it cautioned that it was subject to change. It could include more funding for larger companies and high tech firms, after earlier assistance focused on smaller businesses, one of the people said. Workers may also be required to set aside less money for severance pay so they can see more in their paychecks, and officials are considering allowing people to withdraw some funds from short-term, tax-free savings plans without penalty.
The central bank has also stepped up monetary efforts, announcing Monday it would purchase 50 billion shekels of government bonds after last week relaunching the program for the first time since 2009. The Bank of Israel is also offering up to $15 billion of swaps in a bid to boost dollar liquidity among local lenders.
The 14 billion shekel figure would likely disappoint Israeli businesses that have called for more fiscal stimulus to ward off recession.
Manufacturers Association President Ron Tomer has said the government needs to find at least an additional 50 billion shekels, though that might not be possible given the current political limbo. Efforts to form a government are ongoing.
“I’m afraid that if this will not be happening in the next week, we are digging our own grave,” Tomer said.
Israel’s numerous conflicts with regional neighbors have made downturns a recurring part of its economic cycle. But this could be the worst situation yet, according to Daphna Aviram-Nitzan, director of the Center for Governance and the Economy at the Israel Democracy Institute research center. She sees the economy contracting 6% to 7% under her most optimistic scenario.
“In the whole history of all wars and all recessions, it never came to a point that in less than two weeks we got half a million of new unemployed people,” Aviram-Nitzan said.
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