A black future for the Turkish economy

Bad times for Turkish finances. The bad times for the economy of the country of Anatolia could continue and, even worse, be aggravated by the global crisis due to the coronavirus. This is the opinion of the New York rating agency Moody's, which has significantly lowered its future forecasts for the territory presided over by Recep Tayyip Erdogan.

Before the outbreak of the coronavirus pandemic, the agency's predictions were quite promising and placed Turkey's estimated growth for 2020 at 3%. Today, however, the picture has changed dramatically. For the second and third quarters of the year, Moody's forecasts a cumulative loss of about 7% of gross domestic product.

"We expect Turkey to be the hardest hit economy among the G20 countries," is the main conclusion of the Turkey section of the Global Macro Outlook report published by the organisation. 

What in particular will cause the downturn in Turkey's economic fabric? Fundamentally, it is the fall in the tourism sector, one of the most important in the country, which gives rise to Moody's pessimistic estimates. The gap left by restrictions on the movement of people, both domestically and from abroad, will be extremely difficult to fill.

"The [tourism] sector will be reduced by 80% due to the coronavirus outbreak. I don't think any tourists from the European market will come to Turkey this year," Bulut Bagci, president of the World Tourism Forum Institute, told Arab News.

Because its economy is relatively undiversified, Moody's predicts that it will have a fairly low capacity for recovery. Its growth forecast for next year 2021 is a very modest 0.8%; a figure that would certainly not serve to recover what was lost in the previous period.

The Turkish government, oblivious to these warnings, is, however, taking a rather more optimistic view of the economic outlook. Berat Albayrak, Minister of Treasury and Finance, was confident that his country would reach the goal of 5% growth by 2020 (Moody's predicts that it will fall by 1.4%).

Recently, Erdogan's administration injected a $15 billion stimulus into his production system in an attempt to mitigate, as far as possible, the effects of the crisis arising from the pandemic. The money is intended, above all, to provide liquidity to small and medium-sized enterprises, which are the most vulnerable in the current situation.
An insufficient response?

However, the steps taken by Ankara do not seem to convince everyone. In fact, the employers' association TUSIAD has sent a letter to President Erdogan in which they consider the measures implemented to date to be insufficient. 

"The package announced by Erdogan looks like a normal economic crisis package, but the situation we are in is unprecedented and requires unprecedented responses, similar to the policies announced by the UK or Germany," Wolfango Piccoli, co-chairman of London-based Teneo Intelligence, told Arab News.

"They are underestimating the damage it can cause, and are not providing the business community with guidelines on the duration of restrictive measures or the extent of the economic slowdown," Piccoli said.

The current looming crisis is punishing an already weak economy, which, over the past few months, has been subjected to harsh sanctions imposed from the White House. Washington has punished Ankara for its recent rapprochement with Moscow on defence matters; Turkey has reached agreements with the Kremlin to acquire S-400 model air defence systems - manufactured by Russia - which goes against the interests of the Atlantic Alliance.

The national currency, the lira, is trading downwards and the balance of trade is also increasingly in deficit. Time will tell whether Moody's or the Turkish Government was right, but the signs, at least, do not look promising for the country.