UPDATE 1-Israel to bolster businesses as market plummets for second day

* Tel Aviv shares slide nearly 8%, extending Sunday’s losses

* Shekel at 3.52 vs dollar compared with 3.416 in mid-February

* Central bank sees 0.7% hit to GDP (Adds central bank estimate, airport measures, details)

JERUSALEM, March 9 (Reuters) - Israel rolled out its first measures to assist local businesses as the main Tel Aviv Stock Exchange indexes, rattled by the global coronavirus outbreak, fell sharply on Monday for the second day running.

The Bank of Israel held an emergency meeting with the heads of the country’s biggest banks and made clear its monetary policy would remain expansionary to support economic activity.

Governor Amir Yaron said Israeli banks have a surplus of 14 billion shekels ($3.98 billion) above requirements and are well-positioned, especially compared with smaller companies.

The Finance Ministry said it was opening a 4 billion-shekel credit line for banks to lend money to small and medium-sized businesses facing a cash crisis with a high-level government guarantee.

“No doubt the fact that the global coronavirus crisis is meeting Israel with a strong economy, low unemployment, a high credit rating and a dropping debt-to-GDP ratio will help us weather the crisis with minimal damage to the economy,” Finance Minister Moshe Kahlon said.

The central bank estimated 0.7% hit to gross domestic product if the virus crisis ends in the first half of the year.

Israel has taken some extreme precautions to prevent a local coronavirus outbreak, forcing travellers from many countries in Asia and Europe into home isolation. That has made travel and trade difficult, with tourism expected to suffer.

The government is considering expanding the quarantine measures to all other countries, cutting Israel off from the rest of the world. A decision is expected later on Monday.

With less traffic, Israel’s Ben Gurion airport will combine all international flights into a single terminal, a spokeswoman said.

The stock sell-off in Tel Aviv extended into the afternoon, where the blue-chip Tel Aviv and the broader TA-125 were down almost 8%. The shekel, which peaked against the dollar in mid-February at 3.416, was at 3.52.

Israeli Prime Minister Benjamin Netanyahu, who now refers to the crisis as a global pandemic, made clear Israel would continue taking stern measures if necessary, although economic needs would be taken into account.

Netanyahu organised a video conference with leaders of Italy, Austria, Hungary, Bulgaria, Romania, Croatia and Cyprus to discuss cooperation during the crisis.

“We each have our own experiences. We see what works, what doesn’t work and we can trade with each other,” he said during the conference call, which was open to the media.

$1 = 3.5182 shekels Additional reporting by Jeffrey Heller; editing by Ed Osmond, Larry King