Turkey is now facing its second huge natural disaster in 24 years, following a 1999 earthquake that killed more than 17,000 people. Now, more than 16,000 people in Turkey and Syria have been killed with numbers still rising as resque efforts continue.
The massive earthquake that hit southeast Turkey will put major pressure on the economy. The 10 provinces affected by the earthquakes account for around 15% of Turkey’s agricultural output and 9% its industrial production.
Also tourists might be deterred from traveling to Turkey. Thousands of buildings and businesses have been destroyed.
Turkey’s economic situation has been a result of the following conditions: high global energy prices, the Covid-19 pandemic, the war in Ukraine, economic policy of president Erdogan making high level of inflation (60%) and the Turkish lira to arecord low against the dollar. Also the official reserves have dropped in recent years.
It should be stressed that the Turkey’s economy has grown robustly since the pandemic (5.5% in 2022) as a result of exports growth, benefitied from a weak currency, as well as a rebound in the tourism sector. The unemployment rate totals around 10%.
Now, many countries from around the world are seeking aid to help with Turkey’s disaster relief efforts. Turkey wil needd massive public spending to rebuild all the areas affected by the quakes.
The main issue is how much money will be required for the reconstruction of the region. The positive side of the economy is fiscal area. Turkey ha s a public debt to GDP ratio of 34% which is low leveol compared to the US and Europe. It means the possibilities of a future increase in the public debt ratio.
The final impact on the economy will likely be significant, and depending on the depth of the demage.