COVID-19 pandemic hits Turkey's economy
Unfavorable macroeconomic indicators are not new in Turkey. But in the case of the data published on Monday by the National Institute of Statistics they show a desolate situation for the Ottoman productive activity in March due to the irruption of the pandemic, according to the digital version of the newspaper Arab News. Turkey's foreign trade deficit has increased by 180% during the last year after the prevention measures against COVID-19, which significantly reduced the volume of exports, with a decrease of 17.8%.
The relation between exports and imports left a deficit of 5.4 billions. Turkish liras ($766.13 million), and imported goods amounted to 18.8 billion liras, while exports only reached 13.4 billion liras. Imports grew by only 3.1 per cent compared to the previous year, and industrial production, especially agricultural products and quarries, accounted for the bulk of exports. The main destinations of Turkish exports were Germany, the United States and the United Kingdom, while the country imported mainly from Germany and China in the same period.
In the last week of April, Turkish customs authorities tried to delay imports to balance the month's trade deficit. They adopted a "red line" practice in customs to route all imported goods through a detailed examination in which each imported good was strictly examined and documented. However, this practice was abandoned following negative reactions from traders.
Meanwhile, the Turkish lira has continued to weaken against the dollar and on Monday seven lira were exchanged for each dollar, the worst exchange rate since the currency crisis in August 2018. The lira's downward trend against the dollar followed the latest move by Turkey's central bank governor, Murat Uysal, when he announced a lower inflation forecast during a press conference on April 30.
Turkey has rejected any agreement with the International Monetary Fund (IMF) on funding assistance, although the pandemic has severely undermined the country's already fragile public finances. A survey shows that only 30.8% of Turkish believe that the country should ask for a loan from the IMF to alleviate the economic effects of the coronavirus crisis whilst 69.2% reject it.
For Timothy Ash, an emerging markets analyst based at Bluebay Asset Management, there is general uncertainty about the impact of COVID-19 on the nation's balance of payments. "Lower oil prices were supposed to offset the loss of tourism revenues, but it was not clear in terms of manufacturing," he told Arab News. "It is clear that manufacturing exports are not going to recover. Therefore, it is likely that the trade and current account deficits will grow this year, which will put further pressure on the lira," he said. Turkey is expected to ease restrictions against the pandemic this month starting with small businesses, while tourism companies such as hotels, museums and the transport sector, the main engines of the economy, could start operating next month.
Tourism professionals are not expecting foreign visitors in June and are preparing for the return of tourists next autumn. Turkish airlines will start operating national flights again next month. The number of foreign visitors to Turkey has declined by 22.1% in the first quarter of the year. The country has also recorded a decline of 11.4% in its tourism revenue in the first two months of the year. The Eurasian nation's economic confidence index fell by 5.8% in April compared with the previous month, according to official data.