In view of the increase in morbidity rates, there is apparently no alternative by to add certain restrictions on activity. However, it is important that these be balanced against reducing the adverse impact on the economy. The reduction of economic activity during the previous closure in March and April led to a decline in GDP by rates that were heretofore unheard of, and it is important to understand that a return to restrictions on that scale will lead to an even more serious impact, since the survivability of businesses and the containment ability of households are lower due to the impacts they have already absorbed.
The restrictions imposed in the previous round managed to reduce morbidity to a great extent within a month. Therefore, it is not necessary to impose more stringent restrictions. Apparently, one of the reasons that we had less of a contraction of GDP than in other countries in the second quarter was that Israel imposed a “smart closure” rather than a “blind closure”, alongside the fact that the economy exited from the closure and returned to economic activity relatively quickly. Moreover, from then until now, many industries have learned to operate better against the pandemic through “Purple Badge” rules, morbidity among their employees is low, and they have implemented efficient compliance and enforcement mechanisms. There is therefore no justification for imposing additional restrictions on them. The restrictions must be focused more specifically on industries with high risk of increased morbidity due to their operations, while also enabling business activity of industries with a high contribution to GDP and to employment, where the risk of infection is low. This will create a more correct balance between the measures to reduce morbidity and moderating the impact on the economy. Such a path was proposed in a document by the Bank of Israel, the Ministry of Finance, the Ministry of Economy, and the National Economic Council during the previous closure, and it would be correct to act this time based on that document from the outset, and to enable the Ministry of Finance and the Ministry of Health to improve and streamline the guidelines from March–April. This outline points to industries such as construction, hi-tech, most of manufacturing, banking and finance, and more, as industries with a large contribution to GDP and/or employment, where morbidity due to their activity is low, such that there is no justification to restrict them at this stage.
The fact that we are having a discussion about a second round of widespread nationwide restrictions on economic activity shows that restrictions, as serious as they may be, are not sufficient over time if they do not end in an efficient process of cutting off the contagion chain and stopping the spread of the disease. Without such a system, exiting the closure will again be accompanied by an increase in morbidity and the need for further restrictions of activity, and G-d forbid, a repeat. Since the second round of economic restrictions, and certainly any third one, will be too harsh to bear for many businesses and families, it is important to ensure that the planned restrictions end with a system that will enable an efficient halt to the spread of the disease. If such a system is not expected to be available at the end of the restrictions, we must consider whether it is correct to impose the restrictions at this time. Alongside this, it is important to make sure that there is an efficient, dedicated enforcement array for the restrictions that are imposed. Otherwise, it will be the public that complies with the law that will be the most harmed. In a period when many businesses are struggling for their existence, enforcement that ensures a fair distribution of the burden is a critical component in implementing the policy.
Alongside the economic restrictions that will be imposed, it is important that the government implement a system for supporting the business sector and households that are harmed by the reduction in activity. The longer the crisis lasts, and becomes more serious, more and more businesses will have difficulty containing the decline in revenue, and more households will find it difficult to bear their living expenses due to the impact to their income. The safety net that the government recently provided is a good basis for helping and supporting the survival of businesses and making it easier for workers who have been dismissed or placed on unpaid leave. But it is important to plan, expand, and utilize it through a number of components currently being discussed by the economic bodies. For instance: 1. An employee retention mechanism; 2. Assistance to businesses and the self-employed whose turnover has been impacted by between 25 and 40 percent (and not just those over 40 percent); 3. Making the mechanism for returning from unpaid leave more flexible; 4. Easing cash flow for businesses by delaying VAT payments and returning advances; 5. Exemptions from municipal tax for September and October in accordance with the restrictions on activity that will be imposed in the current round.