Turkey’s anti-corona stimulus package and the unanswered questions

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The chief economist of the Turkish Industry and Business Association (TÜSIAD) Zümrüt İmamoğlu said that the labor market will be one of the biggest challenges for the Turkish economy during the coronavirus crisis. She added that exports will also slow down due to global recession while tourism sector in Turkey will not be able to generate the projected FX income this year.

In an article she wrote for YetkinReport, İmamoğlu analyzed the steps which were announced by the Turkish government in a stimulus economic package to counter the negative effects of global coronavirus outbreak.

"If anyone was expecting a broad fiscal stimulus like Hong Kong, Canada or the U.S. are considering, they were disappointed. No checks for the household. What we have is some tax breaks to those sectors most affected by the pandemic, some measures to help with employment such as postponed social security payments and partial work subsidies and 2 billion TL transfers to households in need. While the tax breaks are important to help firms managing their cashflow, fiscal stimulus to households is very limited compared to the size of the economy," she wrote.

According to İmamoğlu, with the package President Erdoğan's government targeted the group most vulnerable to the pandemic, the elderly by increasing pensions to a minimum of 1500 TL [$230] a month.

İmamoğlu, reminded that the recent crisis in Turkish economy which was fueled by an exchange rate spike late 2018 has put the budget deficit over 5% of GDP when extraordinary incomes such as retained earnings from the Central Bank are left out.

"In fact, the government has been using bank credit as its main tool for economic stimulus for a long time. Public banks increased lending, especially before elections and during the recent crisis. Since August the Central Bank is using reserve requirements to increase private bank lending as well. But it was after the coup attempt in 2016 that Credit Guarantee Fund’s limit was increased to 250 billion TL and most of that limit was used in a few months before the referendum on the presidential system. Afterwards, it kept being used as necessary. Now, this facility is much needed considering the uncertainty and risks firms are facing but will 25 billion TL additional limit be enough? Or will the pressure on the banks increase as businesses keep asking for more financing," she asked.

Zümrüt İmamoğlu's article in full can be reached here.