Israel’s economic recovery plan: completely unknown

What will Israel’s economic recovery look like when it begins to emerge from the coronavirus pandemic? Even as rising vaccine levels make Israel “the day after the corona” a situation that hopes to hopefully reach within the next few months, economists are willing to try to predict how it could come on.
“The problem is that we have a high level of uncertainty with too many economic parameters,” said Dr. Yotam Margalit of Tel Aviv University and Senior Fellow at the Israeli Institute of Democracy. “For a ‘normal’ economic crisis, such as the 2008 recession, there are a number of precursors that we can study and learn from. But this condition of the coronavirus is in many ways more like a natural catastrophe, with many factors at play that make it much harder to draw strong insights from the past. “
For example, Margalit said, it is difficult to determine the impact of widespread strikes on the returned labor market. “Some companies have been working on Halat (unpaid leave) for a year, so they’ve learned a lot of time how to work without them, and they haven’t been in much contact. during this period. Other countries offered wage subsidies to employers so that the company could continue to hire their employees and pay only a portion of their paychecks. But for most Israelis, it was either full employment or full Halat. That creates greater uncertainty about whether these staff will be brought back. “
Some sectors, such as hospitality, restaurants and entertainment, return to full employment quickly when things open. “These sectors employ many younger people, who have been among the hardest hit groups with the impact of the pandemic on labor markets,” Margalit noted.
“Israel now has about 650,000 unemployed people in the broader definition (that includes Halat),” Margalit said. “We may have 400,000 or so even after Israel reopens.
The failure of Israel to take advantage of the opportunity to invest in retraining programs may have been a costly missed opportunity, Margalit said. “Israel has spent too much on labor market training for decades, and its gap in labor output with other Western countries has widened. By not asking people on Halat to upgrade their skills to receive benefits, we missed a real opportunity to close the gap. “
Prof. Dan Ben-David, president of the Shoresh Institute for Socioeconomic and Economic Research at Tel Aviv University, agreed. “While we are known as the country of origin, students are receiving a poor education, which has led to productivity falling further and further behind the G7 since the 1970s,” he said. this ended in the last year. “

“The problem is that the government doesn’t have a plan,” Ben-David said. “It doesn’t say ‘this is what happens in three months, six months, and 12 months.’ Just shooting from the hip. “
“The tech sector has consumed this, but there are many parts of the economy that have not,” said Ben-David. “The government is not dealing with fundamentals, and until someone makes an effort, we will continue. We don’t have a state budget, just for political reasons. But a budget is how a nation defines its priorities, and we haven’t done that. “
Neither Ben-David nor Margalit were too worried about a rise in inflation once the economy opened, although Ben-David did not discount the potential. “In most recessions, there is no cause for concern about inflation, as declining demand leads to lower prices. But this is not a normal recession, and it is not yet clear whether supply or demand will rise more quickly. “

Margalit said it is doubtful that US President Joe Biden’s economic stimulus plan will increase the money supply to the extent that it is causing rapid inflation. “Most economists don’t think inflation is a major threat,” Margalit said. “I believe there is a much greater concern that governments will not do too little to boost the economy than there is a concern that they will do too much.”