By the end of 2020, global unemployment rates in the world's advanced economies will be higher than at any time since the Great Depression the Organization for Economic and Cooperation and Development said Tuesday, adding that global economy is not expected to bounce back to its pre-pandemic levels until 2022 at the earliest.
The Paris-based organization, which serves 37 countries and which Israel joined in 2010, warned world government against prematurely rolling back emergency measures designed to boost employment, saying now was the time for incentives to stabilize the job market.
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Israel's economy, regularly lauded for being one of the most stable in the world, was forced to slow down to about 15% activity as the public and private sectors were shuttered in early March in an effort to stem the spread of COVID-19.
While Israel has been gradually resuming economic activity over the past few weeks, the coronavirus crisis has triggered unprecedented unemployment of 26% – compared to 4% prior to the outbreak.
With a second outbreak now in full swing, the government has once again imposed restrictions on public life, saying they are imperative in order to avoid a second, nationwide lockdown – something that would cripple the economy.
The National Insurance Institute said that May ended with an unemployment rate of 23.5%, or 960,000 Israelis who have filed jobless claims.
According to the NII, 206,000 people who were placed on unpaid leave returned to work in May, compared to 35,000 in April.
The Israel Employment Service noted that the incentive program offering grants to employers for each employee taken back from furlough is expected to help reduce unemployment rates as well.
The government has already injected an unprecedented 100 billion shekel ($28 billion) into the economy as part of its financial bailout plan. Still, the Bank of Israel predicted that the budget deficit for 2020 will amount to NIS 150 billion ($43 billion) or 11.5% of the gross domestic product.
But according to the OECD, the corona crunch may trigger the worse peacetime recession in the past 100 years.
While developed economies are likely to experience a rapid initial recovery from the recession, it will still fall short from the pre-pandemic level recorded in early 2020, it said.
OECD Chief Economist Laurence Boone said the economic impact of coronavirus on unemployment, corporate bankruptcy, and adjustments to social distancing would prevent the normal process of economic recovery from recession.
"Most people see a V-shaped recovery, but we think it's going to stop halfway. By the end of 2021, the loss of income exceeds that of any previous recession over the last 100 years outside wartime, with dire and long-lasting consequences for people, firms, and governments," she said.
The OECD predicted that the global economy is likely to shrink by 12% in the first half of 2020, saying it will still be below the level it reached at the start of 2020 by the end of the following year.
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"When you reopen the sectors that can function nearly normally, then you obviously get a surge in activity, but because the virus is prevalent elsewhere or is not eradicated in our countries, then some borders remain closed, some mobility will be hampered and some sectors cannot function like entertainment or mass gatherings," Boone said.
The International Monetary Fund has also slashed its economic forecasts for world markets, foreseeing that global gross domestic product will shrink by 4.9% in 2020 due to the coronavirus outbreak.
"The COVID-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated," the IMF's World Economic Output report said, adding that the global economy is likely to rebound by 5.4% in 2021.
The IMF predicted that the Israeli economy would shrink by 6.3% in 2020, adding it does not believe Israel's GDP would be able to return to its pre-pandemic level until 2022.
