THE ECONOMY OF ISRAEL IS THREATENED WITH BANKRUPTCY

Prosperous Israel found itself in a difficult economic situation. The coronavirus pandemic brought not only quarantine and a decline in entrepreneurial activity, but also systemic problems that many preferred to ignore.

For the first quarter of 2020, the economy of the most prosperous country in the Middle East has fallen by more than 7%, which is the worst indicator in the last quarter century.

The experts note that the service sector has become the most vulnerable spot in the Israeli economy.

Business orientation to the export made the country dependent on the external factors, exposing the plight of some industries that have shown their inefficiency. Not only the national airline El Al, the problems of which were reflected in one of the previous articles of Rusbankrot, but also the entire tourism sector turned out to be a step away from bankruptcy. Tourism of the country was one of the first to lose, having introduced the quarantine for tourists from Asian countries in February and then spreading it on all visitors until March.

The government treasury spending was reduced by more than 10% in the first quarter. The investment activity in Israel 2020 fell by 17.3% in January-March.

The consumer spending fell even further - by 20%.

In the second quarter, it was not only El Al that declared bankruptcy, confronting the prospect of mass dismissal of about 6.5 thousand people who worked for the airline. "Aviation Industry" Concern, having fired 900 employees, became famous for the resignation of CEO its Nimrod Schaeffer. The increase in the number of detected cases of COVID-19 infection in June crossed out the opportunity to start the tourist season in the country, putting the most profitable segment of the market in Israel - medical services for visitors in an extremely unsound financial condition. As a result, the ban on entry into the country was extended until August.

In the absence of tourists visiting the country to receive high-quality medical services, hospitals were without sources of financial income.

Having sent the employees on unpaid leave, the clinics’ management complains about a shortage of staff, and the local media accuse the authorities in insufficient competence in the area of the entire health protection system.  

The resignation of the head of one of the leading services of the Israeli Ministry of Health, Sigal Sadecki, was a clear example of a scandal in power structures against the background of the second wave of the epidemic that happened in June. The low mortality rate, which became a kind of marker of the quality of medical services in the country, was leveled in the public consciousness by a huge increase in the number of cases. The political crisis that Israel had experienced throughout 2019 only exacerbated the negative impact of the problems, caused by the virus. The criminal cases against the leader of the ruling party and Prime Minister Netanyahu delayed the formation of a government until May 2020.

The economic analysts note that Israel retains several backward sectors of the economy, such as transport, construction and the banking sector.

The lack of good neighborly relations with surrounding states and the poorly developed domestic market, the unemployment in which is growing (estimated at 21%), exacerbates the negative state of affairs. It is not clear, what to do with 849 thousand people who are looking for jobs through the official employment service, given that 578 thousand of them are those who were sent on unpaid leave.

Against the backdrop of the indicators of 2019, in which the country's gross domestic product reached 3.3%, and the export volume amounted to $ 114 billion, this year threatens to come as a shock to the whole country.

What will the country do without tourists, more than 4.5 million of whom brought the country $ 6.6 billion last year?

The overheated economy of the country with large-scale expenditures on defense, construction of settlements and the religious sphere (Orthodox Jews, who are actually dependent on the state), runs the risk of facing a state close to the collapse. The experts compare the current psychological atmosphere with the banking crisis of 1983-1985, during which the inflation reached four figures.