Which curve will Erdoğan's government save?

Like all governments around the world, the Turkish government has a number of tough calls to make during this time of public health turned economic crisis. So far, the Turkish government seems to have opted to keep up economic activity as long as it can, before it imposes a total lockdown.

Like all governments around the world, the Turkish government has a number of tough calls to make during this time of public health turned economic crisis. The trade-off is straightforward. Governments must keep an eye on two curves. The first one shows the number of infected patients. That curve is a function of the number of people tested on daily basis. So it may or may not increase depending on the number of tests that are being undertaken. Yet official figures are now somewhat irrelevant.

By now, we know how the curve evolves under various mitigation scenarios. Depending on how strict and wide-reaching the rules of isolation are, this curve can be one that is concentrated over a shorter period of time thereby putting tremendous stress on the health system or a one extending over a longer period of period, allowing some respite for the health system. Under that scenario, the death toll is inevitably high. The other possibility is a curve that extends over time, thereby allowing some respite for the health system. This is where the second curve comes into play: that of an economic growth or recession. As the government starts imposing more restrictions on economic life, the infected peoples’ curve will spread over time, but the recession curve will deepen due to the continued stagnation of economic activity.

So far, the Turkish government seems to have opted to keep up economic activity as long as it can, before it imposes a total lockdown. The public is not provided any information regarding the government’s decision-making process. It has been claimed, on a normal day, without the Covid-19, intensive care units in Turkey run at a 75 % capacity. Thus, some doubt the health system can in fact accommodate the influx that will be caused by the virus. Publicly unavailable data also include the distribution of the tested, the infected and the dead by province, which makes it rather difficult to evaluate the situation.

In anticipation of impacts the Government announced an economic “shield” package to help businesses survive the crises. There is quite a bit of criticism but the package does provide some relief for SMEs. I believe it fails to provide relief for the most vulnerable part of the society.

In a poll we did at TurkiyeRaporu.com between March 16-17, we asked respondents across Turkey, how they invest their savings. The most striking result in our survey is that 50% of the participants stated that they do not have any savings. So almost half the population does not produce a surplus. The do not have a buffer to make it through rough times. This is not surprising, as almost 10 million employees are estimated to make close to the minimum pay.

Another important result of our survey is that 10% use their cash saving to pay debts. This means that there is a very significant part of the population that either depends on a monthly pay check or daily revenue generated from which ever work field they are active in. The shrinking of the economy, even without the lockout, puts this group of people under tremendous stress. This is not only a humanitarian issue but it is also an economic issue going forward, as once this crisis is over the sociological residual will be too costly.