GDP fell by 7.1% in Q1 of 2020

Dramatic drop largest in 20 years

Gross domestic product (GDP) contracted by 7.1% during the first quarter of 2020, compared with the final quarter of 2019, the Central Bureau of Statistics (CBS) said on Monday, representing one of the first major evaluations of economic damage caused by the coronavirus pandemic.

The contraction marks the greatest decrease in annualized growth since the turn of the century – exceeding contractions during the 2001 and 2008 financial crises – and the first drop since 2012. GDP expanded by 4.6% in the fourth quarter of 2019.

The first three months of 2020 were also characterized by a 20.3% drop in private spending, while investments in fixed assets decreased by 17.3%, the CBS said. Imports of goods and services shrank by 27.5%, but exports declined by a more modest 5.9%.

The CBS also published new unemployment figures for April, revealing that 1.53 million Israelis were recorded as being out of work last month, or 39% of the entire workforce. Among them, 1.276 million employees found themselves out of work as a direct result of the coronavirus outbreak.

Sectors with the greatest unemployment rate during April were entertainment and arts (88.3% of all workers

were unemployed); food and hospitality (87.3%); other services (82.4%); education (78.4%); and construction (75.8%).

In addition, the Bank of Israel Monetary Committee decided on Monday to leave its benchmark interest rate unchanged at 0.1%, citing unprecedented contraction in the scope of economic activity and a steep increase in the number of jobseekers.

In April, the central bank cuts the rate from 0.25% to 0.1%, echoing similar measures taken by central banks worldwide to ensure the orderly functioning of financial markets amid the coronavirus outbreak.

The bank’s research department provided a more optimistic estimate as it updated its macroeconomic forecast published last month. GDP is now expected go contract by a total of 4.5% in 2020, compared with the 5.3% contraction detailed in the bank’s April forecast. The economy is then expected to grow by 6.8% in 2021, compared with 8.7% in the bank’s April forecast.

The more moderate forecast was based on the bank’s previous assumption that restrictions to contain the coronavirus outbreak would be lifted gradually by the end of June. Recovery is expected to be more prolonged than previously thought, however, due to the impact of social distancing restrictions that are