Coronavirus Outbreak’s Economic Impact on the Business Sector Will Remain Long after the Health Effects of the Virus Disappear
In recent weeks, Israel and the whole world are in a state of an unprecedented crisis, accompanied by confusion, uncertainty and anxiety.
Even though anxiety is health-related, many businesses closed due to strict guidelines and necessity to maintain public health. Among such businesses are entertainment venues, restaurants, theaters, cinemas, offices that provide various services, and more.
The damage caused to the business sector is very severe.
Some businesses are closed, while others have reduced their activity by dozens of percent.
Many employees are on an involuntary furlough and unemployment surged to a rate we are not used to.
Senior officials at the Ministry of Finance, Bank of Israel and business sector estimate that damage to the Israeli economy as a result of the pandemic could reach NIS 100 billion, assuming the virus will be eliminated during the second quarter of 2020.
Senior economy officials also predict that the crisis will lead to a sharp decline in economic growth rate from about 4% in the last quarter of 2019 to 0% according to an optimistic scenario, or to a negative growth if the crisis will not be resolved by summer.
All sectors, without any exceptions, suffer the effects of this crisis, including inbound and outbound tourism agencies, event production companies, entertainment sector, restaurants, coffee shops, fashion chains and more. However, those who suffered the most severe damage are small businesses and middle market companies, since even regardless of the crisis, small businesses and middle market companies in Israel are dealing with challenges and obstacles as part of their routine, and are striving to survive on a daily basis. Such obstacles include liquidity related issues, difficulty to obtain credit, burdensome regulation, and cumbersome bureaucracy, difficulty to recruit highly qualified employees and acquire advanced technology that can push the business forward.
We are in the midst of a developing global crisis, the effects of which are evident across all aspects of life. A crisis that no one expected or could prepare for, and even worse – it is impossible to estimate when it will end.
The State of Israel has been dealing with crises throughout its entire existence, only that this time, we are in a different kind of war, and as all other countries, we are fighting an invisible enemy, on which we have no intelligence.
Currently, Italy is in a state of collapse, to be followed by Spain and France. In my opinion, UK and USA are “on the way”, while they are starting to experience the magnitude of the pandemic, but unlike Israel and South Korea, they have not yet taken any significant preventive measures.
It is important to keep in mind that every crisis ends eventually, and once the coronavirus pandemic is over, we will have to go back to our little corner of the world and take care of businesses that suffered the crisis effects, so that we would be able to embark on a path of economic and business growth once again.
Economy leaders have the national duty to act quickly in order to find ways to alleviate the burden of bureaucracy and provide simple, convenient solutions for businesses, such as reducing the number of fees, making it easier to obtain credit, reducing taxes, assisting with employee hiring process, shortening planning and construction processes, assisting with process implementation, accelerating the green routes for regulatory proceedings and more.
In today’s health-threatening reality, and even more so, during this period of global crisis, it is imperative to provide small businesses and corporations with a reasonable level of certainty, as well as a series of significant benefits and incentives to allow them to recover quickly and continue running their businesses, development centers and factories.
As mentioned, we are in the midst of a global crisis of unprecedented proportions, and even when we solve our economic problems here at home, it will still have effects and consequences, since we do not live in isolation and conduct business relations worldwide. We export and import goods globally, therefore, the crisis will have far-reaching effects.
This is a world war against an enemy we do not know. In times like these, political disputes should be set aside, while we should stay united and focus on protecting the public health and finding solutions to assist the economy.
***The article was written by Reuven Shiff, CPA (Isr) – The Managing Partner of RSM Shiff Hazenfratz & Co., former President of the Institute of Certified Public Accountants in Israel.