Published:
The current earthquakes seen in Turkey are a devastating event that will have ramifications in all sectors of life. In this blog we will be discussing the economic impact. The recent earthquakes in Turkey will significantly impact the Turkish economy, which will ripple throughout the world economy. Turkey has the largest economy in the world at nearly . Economic consequences of this disaster are seeming to be high inflation, a collapsing stock market, and a devastated agricultural sector.
The earthquake itself have created large physical catastrophe. Recently, the Turkish Enterprise and Business Confederation estimates that the cost to rebuild will be between billion USD. Over buildings, roads, and seaports were destroyed, which will limit their supply chain for exports. This physical destruction on top of the , leaving the state in a social tragedy of grieving along with a smaller workforce.
To understand the impact, we need to understand where Turkey stood economically before the disaster. Before the earthquakes, Turkey’s inflation had slowed to around from a previous high of . Inflation had been the countries for years, as the Turkish Prime Minister Erdogan cut interest rates, which fueled more inflation. This has seriously the lira (). The lira recently hit all-time lows of almost lira to a dollar. Devaluation makes it more difficult for Turkey to bring in foreign investors, who will charge a premium to account for increased risk. Rising devaluation, higher premiums, and billion dollars in debt that Turkey owes raise the fear that the Turkish economy could risk collapse.
Now, after the earthquake, certain industries are at an even higher risk, particularly Turkey’s agricultural and industrial sectors. The impacted provinces in Turkey account for nearly of their agricultural output and of their industrial output. The European Bank for Reconstruction and Development believes Turkey could lose up to of their GDP. Growth for Turkey was projected to be , and now it is down to . There could be a ripple effect throughout the world economy as Turkey is a leading provider of several fruits, including . Along with agriculture and industrial output, tourism is an of the Turkish economy. This sector is also to take a big hit as many popular tourist spots are no longer accessible.
Immediately after the earthquakes, the Turkish stock exchange lost about billion dollars' worth of value before the government closed the stock exchange, raising about the sentiment of foreign and domestic investors. However, the economy does have some hope, especially after they have began reopening. Their stock market is up since reopening. This can be seen with Turkey's , including Sasa Polyster, Ford Otosan, and Koç Holding. Each of these businesses saw a during the disasters, and are now rising again towards normal numbers.
There is the belief that the massive new reconstruction projects will help restart . The believes that the recent 7.8 earthquakes will hurt the economy less than the earthquakes in 1999. , senior emerging markets economist at Capital Economics in London, believes that “Economic activity could rebound quickly after the quake, [...] Any impact this quarter will be made up." Turkey's has also commented that they believe Turkey's economy would not be impacted in the medium term.
With this large amount of loss from Turkey, there is hope that their economy and people will continue to recover from this terrible disaster.
File under