Central bank: Israel ranks last in virus assistance to citizens

Report says country only offers equivalent to 3.3% of GDP, compared to 11.5% in Australia and 9.8% in U.S.; institution hails its own performance during crisis, saying it managed to eliminate panic in markets; Finance Ministry disputes bank's calculations, says higher proportion of GDP earmarked for assistance

Gad Lior|
Israel ranks bottom among countries granting financial support to businesses and households during the coronavirus pandemic and last to guarantee loans and establish lending funds to assist the local economy, according to a report issued by the Bank of Israel on Tuesday.
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  • The ranking was devised by comparing the amount of support offered by a country to its annual GDP.
    Israel offers 3.3% support compared to 11.5% in Australia, 11% in Singapore, 9.8% in the U.S., 8% in Thailand, and 8% in New Zealand.
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    ההפגנה בפארק צ'רלס קלור
    ההפגנה בפארק צ'רלס קלור
    Small business owners protest lack of government support in Tel Aviv
    (Photo: Moti Kimchi)
    Of the countries at the bottom of the list alongside Israel are Poland, Brazil, Sweden, the U.K. and Malaysia, who all offer support amounting to 3.6-3.9% of their respective GDP.
    The Finance Ministry said after the release of the report that it disputed the calculations made by the Bank of Israel and said that the assistance offered actually amounts to 13.9% of the national GDP.
    Due to the solid state of the economy prior to the crisis—which was reflected in historically low rates of unemployment, continued growth above the potential rate, the high level of resilience and close supervision of the financial system—Israel's economy continues to function.
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    רונן מיילי מבעלי מסעדת הילטון ביי
    רונן מיילי מבעלי מסעדת הילטון ביי
    A restaurant closed during the coronavirus shut down in Tel Aviv
    (Photo: Yaron Sharon)
    However, the configuration and pace of the recovery from the crisis are critical, the bank said.
    A lack of job security, high rates of unemployment and uncertainty in the labor market will lower the public’s expectations of their future income, and this can be expected to lower demand in the economy, it said.
    The public’s wealth, which has been eroded as a result of the decline in the prices of financial assets, is also expected to negatively impact private consumption in the economy.
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    הבניין המיתולוגי של בנק ישראל
    הבניין המיתולוגי של בנק ישראל
    The Bank of Israel headquarters in Jerusalem
    (Photo: Guy Assiag)
    In the early stage of the coronavirus crisis, uncertainty over the severity of the disease caused a major shock to the financial markets, the bank said, which led to a liquidity shortage and raised concerns about the continued orderly provision of credit by the financial institutions.
    As a result, the Bank of Israel says it took a range of steps intended to restore the markets to full functioning, to ensure that financial institutions had sufficient liquidity and to provide households and businesses with access to credit.
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    התמונה של פרופ' אמיר ירון
    התמונה של פרופ' אמיר ירון
    Governor of the Bank of Israel Amir Yaron
    (Photo: Alex Kolomoisky)
    In the report, the central bank says the steps it took can be said in the short-term to have reduced much of the panic in the markets, restoring them to proper functioning.
    The report notes Israel's interest rates, which saw just a 0.1% drop, were hardly affected by the crisis because they were so low before the pandemic.
    The bank’s Financial Stability Report, which is published twice a year, presents an analysis by its economists of the main risks facing the financial system and its resilience to these risks.
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