Today I, along with the Supervisor of Banks, gathered the heads of the banking system together. This was in order to discuss how they can assist in dealing with the economic ramifications of the spread of the coronavirus and to follow closely their preparations for providing orderly banking services. The banking system is robust and it is critical that the banks will know to find the balance between responsible credit policy and the economy’s financing needs—particularly in regard to the business sector, with an emphasis on small and medium-sized businesses.


I am in ongoing contact with the Prime Minister, the Finance Minister, and all the officeholders in the economic system—to include all our activities related to this event. I instructed the establishment of a special team, headed by the Deputy Governor, to monitor and analyze the developments in the financial markets.


We are of course closely following the developments in equity markets in Israel and abroad, and it appears that despite the declines, the markets in Israel are functioning well from the perspective of liquidity required for trading.


In addition, we are prepared for all developments: in any case of deterioration or signs of market failure in the financial markets, the Bank of Israel has the tools to return liquidity to the markets. Moreover, the supervising entities have the tools to deal with a worsening of financial risks in Israel and abroad.


As part of this, the Bank of Israel Research Department is carrying out ongoing assessments with regard to the coronavirus crisis’s impact on the Israeli economy. According to the baseline scenario, in line with developments to date and assuming that the event will end by the end of the second quarter, the crisis is expected to lead to a decrease of approximately 0.7 percentage points in growth this year. With that, it is an evolving event, and there is considerable uncertainty regarding the continued spread of the virus and the ramifications deriving from that, and as a direct result, there are additional scenarios in which the impact will be more significant.


However, when the spread of the virus will halt, GDP is expected to return to the path from before the crisis, which will be reflected in a temporary acceleration of activity. The pace of recovery will be affected by the policy steps that will be taken during the crisis in order to moderate the adverse impacts.


The coronavirus event is meeting the economy at a very good place. The strong economic data—including a low debt to GDP ratio and unemployment rate, a current account surplus, a high level of foreign exchange reserves, and a robust financial system—increase the economy’s resilience to the developments.


It is important as well that I emphasize that we are supporting, and will continue to support as much as necessary, economic activity, so that the economy will be able to continue to produce and develop. The monetary policy remains, and will continue to be, very accommodative; the low interest rate supports the economic activity. The Bank of Israel headed by me will continue to accompany the economic developments and we will not hesitate to act within the framework of our authority in order to further support economic and financial activity in the economy.


I am also sure that the government will continue to do its part in order to assist the economy as much as necessary.


It is important that the Israeli economy’s wheels continue turning as energetically as possible. I am confident that the Israeli economy, which perhaps more than any other economy in the world is used to conducting robust economic activity under uncertainty and conditions that change rapidly, will endure the coming period with minimal adverse impact.