Israeli Economy Not Expected to Take Hard Hit From Coronavirus

Bank of Israel holds key rate, but stocks mark second day of sharp falls

A tourist wears protective mask while waiting for a flight back to South Korea at the Ben Gurion airport near Tel Aviv, Israel, February 24, 2020.
Ariel Schalit,AP

Israel will see a loss in gross domestic product of 0.2% if the coronavirus epidemic lasts for three months, but the hit could reach more than 1% if it lasts for an extended period, Finance Ministry Chief Economist Shira Greenberg said on Monday.

Her forecasts, which assume that the virus will not infect large numbers of Israelis and have a direct impact on the Israeli economy, came as the country’s top economic policy makers met in Tel Aviv to assess the situation.

Finance Minister Moshe Kahlon, who named an interministerial committee to monitor coronavirus developments, said at this stage the there was no major risk facing the Israeli economy.

Greenberg agreed. “Official statistics have so far not shown any damage to economic activity in Israel, but some large companies have pointed to potential problems lying ahead, and some have even reported problems already,” she said.

The Bank of Israel announced on Monday it was leaving its base lending rate unchanged at 0.25%. “No significant macroeconomic impact is expected in Israel. If the crisis persists and spills over into additional countries, and particularly if strict preventative measures are required in Israel, it is expected to have a more significant impact,” it said in a statement.

Despite the optimism from government officials, the Tel Aviv Stock Exchange marked its second day of trading sharply lower. The benchmark TA-35 index dropped 1.4% to end at 1,661.25 points.