Coronavirus damage to Israeli businesses valued at $12 billion
Economic damage to private-sector businesses, excluding the aviation sector, amounts to NIS 43 billion ($12b.) since the start of March, according to data published by the Federation of Israeli Chambers of Commerce on Thursday.
Industries hit hardest by the coronavirus outbreak include the tourism sector, hospitality and nonfood retail, which have all seen revenues drop by more than 80%.
“The unprecedented scale of damage to the business sector and to employment necessitates the return of the economy to operations at an accelerated pace,” federation president Uriel Lynn said.
“Models [of financial assistance] offered by the state so far, which have consisted of selective aid for all the business sector based on loans, are like putting a plaster on a wound to the aorta,” he said. “The state must understand that the exit process from the crisis must include an effective business compensation process, which includes a fixed formula and clear criteria comparing revenue loss during the months of the crisis with the same period last year.”
Based on an analysis of employees placed on unpaid leave since the start of the outbreak, the federation said 30% of all affected workers (330,000) are from the retail sector, 14% (143,000) are from the hospitality sector), and a further 30% are from other service-related businesses.
Government-guaranteed loans for small businesses offer attractive terms, but their implementation is “one big bluff,” Israel Chamber of Independent Organizations and Businesses (LAHAV) president Roee Cohen told the Knesset
Coronavirus Committee.
While banks are tasked with administering the loans, they are unwilling to provide funds to at-risk businesses that are unlikely to open in the coming months, including restaurants, gyms and conference venues, he said.
“After the Health Ministry declared that entire industries have no chance to return to work within five to six months, that is why not even a single restaurant has received a loan,” Cohen said. “The banks do their own math, and see there’s no chance of returning to work. Something is rotten in the method. There isn’t even a debate when a business from one of those industries submits a request for a loan.”
Responding to Cohen’s remarks, Finance Ministry Budget Department representative Asaf Wassercug said the ministry is aware of the issue and is aiming to solve it together with the banks.
“There are a number of ideas, and there are advantages and disadvantages [of delivering aid] through the banks,” he said.
According to a study published by the Central Bureau of Statistics in early April, approximately 47% of businesses reported they would be unable to continue operations should current restrictions on the economy continue for an additional month.
Only 13% of companies said they could survive for more than six months in the current situation, with almost half of those companies active in the hi-tech sector.
Gross domestic product is forecast to contract 5.3% this year and rebound 8.7% in 2021, according to Bank of Israel researchers. The unemployment rate, which climbed to 26.25% on Thursday, is expected to shrink to 6% by the end of 2020 and reach 5.5% in 2021, the central bank said.