How will earthquakes affect the economy? – Last minute Turkey and world news

SAFAKNA, TURKEY. According to experts assessing the economic impact of the earthquake, the earthquake will reduce economic growth to 1 percent in 2023. A new increase in inflation is also not far off.

Turkey Discussions about the impact of the earthquake, which suffered the heaviest losses in its history, on the country’s economy continue. Even the most optimistic estimate predicts losses in the tens of billions of dollars, and it is said that earthquake-hit cities could take many years to return to normal.

According to the Turkish Statistical Institute (TUIK), the 11 provinces affected by the earthquake account for 9.8 percent of the region’s GDP, with about 14 million people living in the region. in the disaster area economyformed both by agriculture and animal husbandry, and by industrial production, especially textile, metallurgical and energy.

For example, Kahramanmaras alone produces 36 percent of the yarn produced in Turkey, while Gaziantep, an export base for the Middle East markets, has 60 percent of the world’s solid carpet production. One third of Turkey’s citrus production is located in Adana, and Hatay is home to Turkey’s largest smelter, producing 21 percent of citrus production. Sanlıurfa, which has come to the fore in tourism and gastronomy in recent years, is a leader in the production of grain, cotton and lentils. A report released recently by the Washington-based Middle East Institute, which publishes reports and analyzes on countries in the Middle East, says that after the earthquake, the number of people expecting Turkey to face another currency crisis in the near future is increasing. Dr. M. Murat Kubilay’s report noted that the Turkish economy continues to demonstrate extreme vulnerability to external financial shocks, which negatively affected domestic expectations.

In his assessment for DW Turkish, Dr. Emphasizing that it would be incorrect to compare the impact of the Kahramanmaras earthquake on the economy with the 2011 Van earthquake or the 1999 Marmara earthquake. M. Murat Kubilai said: “The Van earthquake occurred in a very limited area. The earthquake in the Sea of ​​Marmara, on the contrary, occurred in the industrial and financial center of Turkey. This earthquake is in between. It affected a huge territory, but the financial system works, there are no serious breaks in the supply chain. However, the picture is not yet clear.

“Growth could drop to 1 percent in 2023”

Earthquake Before that, there were serious problems in the agricultural production of the South-Eastern region. On the one hand, the drought, on the other hand, the agricultural producer price index, which in January 2023 exceeded 142 percent, indicated a significant slowdown in agricultural production. After the earthquake, the problem of nutrition is especially acute in the region. In addition to the infrastructure lost by producers, information about the number of animals killed in the earthquake and the departure of farmers from the region is not yet clear. According to Murat Kubilay, although the damage caused to infrastructure by the earthquake will exceed $10 billion, the main negative effect will be in Turkey’s growth rates. Expressing that the Turkish economy, which is expected to grow by 3-3.5 percent in 2023, could lose about 2 percent of this growth, Kubilay said: “In other words, without growth, we will lose about $20 billion.”

“Inflation does not fall below 50 percent”

Another question of interest to the post-earthquake economy is what will happen to inflation. Inflation, which rose to 90 percent in consumer prices and 160 percent in producer prices, has risen rapidly in the past 1.5 years thanks to the government’s policy of lowering interest rates in Turkey and began to ease in November when the base effect began to show. play. The inflation last announced in January 2023 was 57.68 percent in consumer prices and 86.46 percent in producer prices year on year. President Recep Tayyip Erdogan said before the earthquake that everyone should calculate the inflation rate at the end of the year as 20 percent. However, according to experts, the need for many goods and services after the devastation caused by the earthquake will have an upward impact on inflation. According to Murat Kubilay, even if there is no pre-election tension or a currency crisis, inflation will close the year at 50 percent at best. In other words, Kubilay emphasized that the decline in the purchasing power of the population will continue and said: “However, both monetary expansion and additional taxes will be on the public spending agenda. This will have an accelerating effect on inflation,” he said.

“New attacks on the dollar exchange rate are possible”

Another weak point in the economy is the deficit of foreign trade. Turkey, which ran a record $110.2 billion deficit in 2022, has started 2023 poorly. Despite falling global energy prices, import spending continues to rise in the Turkish economy, which had a trade deficit of $14.4 billion in January. Economists who have said there will be a major burst of demand to heal the wounds of the quake and meet the needs of the millions affected by the quake could set the stage for new attacks on the dollar that the government is trying to keep horizontal. Saying that adding to all this uncertainty about the date of the elections, D. Kubilai said that this situation also caused the earthquake. economy notes that this will increase its impact on earthquake Estimates of the consequences of the earthquake vary

There are different estimates of how the effects of the earthquake will affect the Turkish economy in 2023. In a report prepared by the US investment bank Morgan Stanley on the possible macroeconomic costs of earthquakes for Turkey, it was predicted that the cost of direct damage to housing in Turkey would be about $24 billion. The bank estimates that figure could be as high as $38 billion with some additional spending, so an increase in imports during this period could increase the current account deficit by $9 billion. Disaster modeling company Karen Clark & ​​Company announced that they expect earthquake insurance losses to be $2.4 billion. US investment bank JPMorgan also predicted that the direct cost of physical destruction would be at least $25 billion. The European Bank for Reconstruction and Development (EBRD) also announced that the economic impact of the earthquakes could lead to a loss of up to 1 percent of Turkey’s GDP. In a report titled “2023 Kahramanmaras Earthquake Status Report” prepared by TÜRKONFED, one of the umbrella organizations of the Turkish business world, it was estimated that the Kahramanmaras earthquakes would cause $84.1 billion in financial damage using data-driven methodology. about the earthquake in Marmara.

“The economic system is crooked and based on rent”

In an interview with DW Turkish, Kadir Has, a member of the faculty of the university, prof. Dr. Erinc Yeldan says that the human losses as a result of the earthquake cannot be compared with any financial resource, but it is necessary to balance the country’s economy. prof. Yeldan says that due to Turkey’s production being concentrated in the west, the loss of industrial or agricultural production in cities hit by the earthquake will be limited. Stating that the distorted system of growth and rent, which shows large regional differences in the Turkish economy, has once again manifested itself during this earthquake, Yeldan said: destruction than the destruction caused by an earthquake. It is these distortions that underlie the pain we experience.”

Emphasizing that a comprehensive production strategy is needed to revive the economy of earthquake-affected cities in the next period, Yeldan said that various solutions need to be addressed, such as organic agriculture, modern animal husbandry, conference tourism and gastronomy. Yeldan, who emphasizes that the region should not be seen as a “cheap labor center” for the rest of Turkey, expresses the following views:

“The bleeding wound here is to provide sustainable development services to the people of the region. Until this strategy of regional development, which does not exist, is implemented, neither the economy of the region nor the economy of Turkey as a whole will be improved by building only houses and hospitals.”

NEWS