Central Bank Chief: Omicron Will Cost Israel NIS 2B Monthly

The omicron coronavirus variant sweeping Israel will cost the economy around NIS 2 billion ($641 million) a month, Bank of Israel Governor Amir Yaron said Monday.

“At this point, we are not talking about a macroeconomic development,” Yaron told the Knesset’s Finance Committee. The economic hit would come from decreased consumption and workers sick or stuck in isolation, he said.

“Most estimates are of a relatively short wave – a few weeks. This is why the cost to the economy per confirmed coronavirus case is not of macroeconomic proportions. In such a scenario, pinpoint compensations focused on sectors that have been hurt should be continued,” he added.

The central bank chief said the government should also prepare for a worst-case scenario in which vital services could be compromised as infections soar.

“We’re not there now but such scenarios could bring about macroeconomic damage,” he said.

Yaron further projected that Israel’s economic growth for 2022 would likely be 5.5% with businesses recovering after the omicron wave subsides.

The omicron-dominated fifth coronavirus resurgence could also affect the national deficit.

The Finance Ministry said Monday that despite the pandemic, the government has been able to reduce the deficit to 4.5% of gross domestic product. The ministry originally projected a 6.8% budget deficit for 2021 then revised it downwards to 5.5% in October.

According to Globes, these figures are an improvement from the 11.7% budget deficit in 2020, as they are closer to 2019’s pre-COVID deficit goals of 3.7%.

The report noted that the improvement noted in 2021 stemmed from the increase in government revenues, which came to NIS 413 billion ($132 billion), up 30% from 2020, as well as diminished COVID-related expenditure, which fell to NIS 55 billion ($18 billion), from NIS 68 billion ($22 billion) in 2020.

Tax revenues in 2021 came to NIS 384 billion ($123 billion).