Bank of Israel supports new aid package
JERUSALEM (ISRAEL) – Bank of Israel Governor Amir Yaron on Sunday backed a second stimulus package to help those hurt by the coronavirus outbreak despite the extra spending that is expected to bolster budget deficits in the next two years.
Israel’s government already gave approval for the aid of 100 billion shekels (£22.92 billion), but only the allocation of about half of it has been done. This has prompted a protest by thousands on Saturday night in Tel Aviv against what they said has been an incompetent government response to the economic crisis.
Unemployment has risen to 27% after the country went for a partial lockdown in March. This has now come up to 21% as people have come back from furlough.
Prime Minister Benjamin Netanyahu last week announced a new package for Israelis whose livelihoods have been disrupted due to the coronavirus crisis. The measures, according to him, would provide an economic safety net for the coming year.
Yaron added that the fiscal cost would be 15 billion shekels in 2020 and 27 billion in 2021. This would help bring the budget deficit to about 13% of gross domestic product this year and to 7% next year. Before the second stimulus package, the budget deficit was estimated at 11% of GDP, up from 3.7% in 2019.
The debt-to-GDP ratio would see an increase to 76% in 2020 and to 78% in 2021, which was about 60% last year.
Yaron said at Sunday’s cabinet meeting, “This is the time to take advantage of the safety cushions we have to alleviate the impact of the crisis and allow the economy and public to get through it with minimal harm.”
The Bank of Israel, which upholds its benchmark interest rate at 0.1% last week, at the same time expanding its bond purchases to include corporate bonds and projecting an economic contraction of 6% this year.
(Photos syndicated via Reuters)
This story has been edited by BH staff and is published from a syndicated field.