Depth of crisis: The Israeli economy contracted by 28.7% in the second quarter of 2020
This is the worst quarter of the Israeli economy. The main reasons: the measures of social distance and closure taken during most of the quarter (April-June); Private consumption fell by 43%, consumption of services by 80% and business product by 33%; However, Israel recorded relatively moderate damage compared to European countries, and exports of services even increased by 6%
Adrian Pilot 12: 5916.08.20
Tags: Growth Recession for Skorona
The Israeli economy recorded its worst 3 months ever in the second quarter of 2020, according to data published today (Sunday) by the Central Bureau of Statistics. The social distance measures and closure taken during most of the quarter (April-June) sent the Israeli economy to a contraction in gross domestic product (GDP) of 28.7% compared to the first quarter, where "only" two weeks of social distance measures were recorded and a decrease of 6.9%. Israel is officially in a state of recession. In the first half of the year, there was a decrease of about 10% in GDP compared to the last half of 2019.
Read more in Calcalist:
The dormant services sector has plunged the UK into an unprecedented recession
The corona hits the eurozone mercilessly: its economy contracted 12.1% in the second quarter
Why a second wave? This is a stupid economy
Although this is the sharpest decline in GDP ever in Israel, compared to the world the picture is less difficult. According to CBS data, the withdrawal of both the EU countries and the eurozone was about 40%, of the United States 33% and in the case of countries such as Britain and Spain, the collapse reached more than 50%. In this context, Israel's withdrawal is reminiscent of that of Sweden (which did not take any of the steps taken by Israel) but is still far from that of South Korea (about 20%). The latter is considered an outstanding country in dealing with the corona in all respects.
The CBS notes that in terms of GDP levels, the contraction in the economy returns us to the level of GDP in real terms (after deducting inflation) similar to that of the fourth quarter of 2016.
Collapse of business product
But it is worth concentrating mainly on the Corona's impact on business output, the real engine of the economy that contributes about 75% of GDP: it retreated by about 33% (about 35% if start-ups are neutralized) in the second quarter - more than the impact on overall GDP.
When you dive into the data, you see that everyone has collapsed except for government spending, which has skyrocketed and at an unprecedented rate - about 25% in annual terms - as happens in unconventional events as we saw after periods of war. In this context, the CBS notes two important figures that paint the picture: the government's net purchases jumped by about 81% and reflect its exceptional expenses for medical supplies. On the other hand, the compensation for employees (which reflects actual working hours) and included in civilian consumption fell by 34.3 % On an annual basis following the exceptional vacation that workers took during April, on the other hand, there was a sharp and unprecedented jump of 145% in defense consumption in the second quarter of 2020, which is not detailed, but can be explained by an increase in defense imports.
But the most damaged growth engine is the most important in the Israeli economy: private consumption, which constitutes about 54% of GDP. According to the CBS, it dropped the Corona crisis most significantly at an unprecedented rate of about 43.4% in the second quarter (the Psagot-Calcalist index predicted a decline of about 50%), following a decline of 24% in the first quarter. In the first half of the year it collapsed Private consumption by about 22.4% compared to the second half of 2019. As a result, private consumption per capita, known as the "standard of living", fell by 44.2% and includes items such as food, beverages and tobacco, personal services, housing, fuel and electricity for home maintenance. The reason: an unprecedented decrease in the consumption of services - 80%, with particularly significant effects on transportation services (both in Israel and on flights abroad), accommodation services and cultural and leisure and health services. On the other hand, spending on food, beverages and tobacco per capita decreased by only 8% on an annual basis - a rather minimal decrease that is well reflected in the data used by credit cards, both of the CBS and of the Bank of Israel.
These poor data on the growth level of the economy herald a collapse in imports, which also fell by about 42% in the second quarter of 2020, after a decline of 22.4% in the first quarter. A particularly sharp decline - of 74% - was recorded, as expected, in the import of services, which reflects the halt in tourism leaving Israel (it is recorded in the national accounts as an import of services).
A messenger of Walt. Going out less
A messenger of Walt. Going out less
Photo: Yuval Chen
A red light in the real estate field
There was also a sharp decline in consumption of semi-durable products per capita (clothing and footwear, home textiles, small household and household appliances, entertainment and leisure products and personal belongings) as was expected against the background of closing stores and malls, at a rate of about 54%. Consumption of durable goods per capita (cars and large electrical products) fell by 47.3%, while purchases of cars for private use collapsed by 85%, following a similar decline in the previous quarter. A slightly less severe hit suffered another growth engine - investments - which fell in the second quarter by 32%, following a decline of 19.3% in the previous quarter.
The CBS emphasizes a statistic that must turn on a red light: As a result of the Corona crisis, there was a sharp decline in working hours in the construction industry, which led to a significant decline in investment in residential construction, which fell by 41.6%. The decision to use the closure to accelerate the pace of work in national projects.
With regard to investments in other sectors of the economy, there was an almost total write-off of investments in the purchase of land transportation vehicles - or in simpler words "leasing vehicles" that are registered in the national accounts as an investment - at a rate of 93.4%. This follows a decline in the first quarter of the year, which is not related to a change in tax policy. Still, the good news is that investments in the ICT (communications, technology and information) industries have jumped 49.7% on an annual basis, apparently against the background of the acquisition of software by the business sector that has moved to work at Zoom.
Since this is a global epidemic that has also brought down the entire global economy, including the developed economies that are target markets for Israeli exports, the damage to this growth engine was expected. However, CBS data are surprising: exports of goods and services (excluding diamonds and start-ups) fell in the second quarter of 2020 by "only" 28%, after a 12% increase on an annual basis in the previous quarter. These figures close the first half. Only about 1% (annual calculation). But it is precisely the export of services - the new export engine of the Israeli economy - that recorded a significant damage of 28%, a damage that reflects a complete cessation of inbound tourism caused by the corona crisis. Industrial (excluding diamonds) collapsed by 29%.
However, there is a very important point of light that will become essential during the period of recovery from the crisis: exports of other services, including software, transportation and communications services, not only did not decrease but actually increased by about 6%.
https://www.calcalist.co.il/local/articles/0,7340,L-3845264,00.html
This is the worst quarter of the Israeli economy. The main reasons: the measures of social distance and closure taken during most of the quarter (April-June); Private consumption fell by 43%, consumption of services by 80% and business product by 33%; However, Israel recorded relatively moderate damage compared to European countries, and exports of services even increased by 6%
Adrian Pilot 12: 5916.08.20
Tags: Growth Recession for Skorona
The Israeli economy recorded its worst 3 months ever in the second quarter of 2020, according to data published today (Sunday) by the Central Bureau of Statistics. The social distance measures and closure taken during most of the quarter (April-June) sent the Israeli economy to a contraction in gross domestic product (GDP) of 28.7% compared to the first quarter, where "only" two weeks of social distance measures were recorded and a decrease of 6.9%. Israel is officially in a state of recession. In the first half of the year, there was a decrease of about 10% in GDP compared to the last half of 2019.
Read more in Calcalist:
The dormant services sector has plunged the UK into an unprecedented recession
The corona hits the eurozone mercilessly: its economy contracted 12.1% in the second quarter
Why a second wave? This is a stupid economy
Although this is the sharpest decline in GDP ever in Israel, compared to the world the picture is less difficult. According to CBS data, the withdrawal of both the EU countries and the eurozone was about 40%, of the United States 33% and in the case of countries such as Britain and Spain, the collapse reached more than 50%. In this context, Israel's withdrawal is reminiscent of that of Sweden (which did not take any of the steps taken by Israel) but is still far from that of South Korea (about 20%). The latter is considered an outstanding country in dealing with the corona in all respects.
The CBS notes that in terms of GDP levels, the contraction in the economy returns us to the level of GDP in real terms (after deducting inflation) similar to that of the fourth quarter of 2016.
Collapse of business product
But it is worth concentrating mainly on the Corona's impact on business output, the real engine of the economy that contributes about 75% of GDP: it retreated by about 33% (about 35% if start-ups are neutralized) in the second quarter - more than the impact on overall GDP.
When you dive into the data, you see that everyone has collapsed except for government spending, which has skyrocketed and at an unprecedented rate - about 25% in annual terms - as happens in unconventional events as we saw after periods of war. In this context, the CBS notes two important figures that paint the picture: the government's net purchases jumped by about 81% and reflect its exceptional expenses for medical supplies. On the other hand, the compensation for employees (which reflects actual working hours) and included in civilian consumption fell by 34.3 % On an annual basis following the exceptional vacation that workers took during April, on the other hand, there was a sharp and unprecedented jump of 145% in defense consumption in the second quarter of 2020, which is not detailed, but can be explained by an increase in defense imports.
But the most damaged growth engine is the most important in the Israeli economy: private consumption, which constitutes about 54% of GDP. According to the CBS, it dropped the Corona crisis most significantly at an unprecedented rate of about 43.4% in the second quarter (the Psagot-Calcalist index predicted a decline of about 50%), following a decline of 24% in the first quarter. In the first half of the year it collapsed Private consumption by about 22.4% compared to the second half of 2019. As a result, private consumption per capita, known as the "standard of living", fell by 44.2% and includes items such as food, beverages and tobacco, personal services, housing, fuel and electricity for home maintenance. The reason: an unprecedented decrease in the consumption of services - 80%, with particularly significant effects on transportation services (both in Israel and on flights abroad), accommodation services and cultural and leisure and health services. On the other hand, spending on food, beverages and tobacco per capita decreased by only 8% on an annual basis - a rather minimal decrease that is well reflected in the data used by credit cards, both of the CBS and of the Bank of Israel.
These poor data on the growth level of the economy herald a collapse in imports, which also fell by about 42% in the second quarter of 2020, after a decline of 22.4% in the first quarter. A particularly sharp decline - of 74% - was recorded, as expected, in the import of services, which reflects the halt in tourism leaving Israel (it is recorded in the national accounts as an import of services).
A messenger of Walt. Going out less
A messenger of Walt. Going out less
Photo: Yuval Chen
A red light in the real estate field
There was also a sharp decline in consumption of semi-durable products per capita (clothing and footwear, home textiles, small household and household appliances, entertainment and leisure products and personal belongings) as was expected against the background of closing stores and malls, at a rate of about 54%. Consumption of durable goods per capita (cars and large electrical products) fell by 47.3%, while purchases of cars for private use collapsed by 85%, following a similar decline in the previous quarter. A slightly less severe hit suffered another growth engine - investments - which fell in the second quarter by 32%, following a decline of 19.3% in the previous quarter.
The CBS emphasizes a statistic that must turn on a red light: As a result of the Corona crisis, there was a sharp decline in working hours in the construction industry, which led to a significant decline in investment in residential construction, which fell by 41.6%. The decision to use the closure to accelerate the pace of work in national projects.
With regard to investments in other sectors of the economy, there was an almost total write-off of investments in the purchase of land transportation vehicles - or in simpler words "leasing vehicles" that are registered in the national accounts as an investment - at a rate of 93.4%. This follows a decline in the first quarter of the year, which is not related to a change in tax policy. Still, the good news is that investments in the ICT (communications, technology and information) industries have jumped 49.7% on an annual basis, apparently against the background of the acquisition of software by the business sector that has moved to work at Zoom.
Since this is a global epidemic that has also brought down the entire global economy, including the developed economies that are target markets for Israeli exports, the damage to this growth engine was expected. However, CBS data are surprising: exports of goods and services (excluding diamonds and start-ups) fell in the second quarter of 2020 by "only" 28%, after a 12% increase on an annual basis in the previous quarter. These figures close the first half. Only about 1% (annual calculation). But it is precisely the export of services - the new export engine of the Israeli economy - that recorded a significant damage of 28%, a damage that reflects a complete cessation of inbound tourism caused by the corona crisis. Industrial (excluding diamonds) collapsed by 29%.
However, there is a very important point of light that will become essential during the period of recovery from the crisis: exports of other services, including software, transportation and communications services, not only did not decrease but actually increased by about 6%.
https://www.calcalist.co.il/local/articles/0,7340,L-3845264,00.html
