Initial Economic Analyses from Türkiye and Beyond
The initial economic analyses concerning the earthquake in Türkiye are based on two main foundations:
- Basic Comparison with the 1999 Izmit Earthquake & Reconstruction
- Probable Decline in Production Capacity & Financial Burden Caused by the Funding Need
Some Turkish economists and casual observers see this historic earthquake as something already experienced, which is likely why they seem calm and well-prepared, backed by their high scientific self-esteem. However, their overly dignified analyses fail to prove anything more than a simple assumption: “If 10x caused 10 in 1999, in 2023, 10x will cause about 10.”
Thanks to each.
JP Morgan’s initial analysis on the possible cost is: $25 Billion, or 2.5% of GDP.
European Bank for Reconstruction and Development (EBRD): The potential economic impact could result in a loss of up to 1% of GDP (a reasonable estimate based on fair plus-minus calculations).
Turkish Enterprise and Business Confederation: The cost could reach up to $84 Billion, or 10% of GDP.
IMF Executive Mohieldin: Turkey has proven resilient, and it is very unlikely to impact Turkey’s GDP to the same extent as the 1999 Izmit Earthquake.
World Bank’s estimate: $34 billion in damage, equivalent to 4% of Turkey’s 2021 GDP, meaning it will likely be about 3.2% of the 2023 GDP.
Will it be 1%, 2.5%, 3.2%, or 10%?
Many thanks to each.
What does MAZ Corporate say about the impact?
The probable effect of the earthquake on the Turkish economy has not yet been studied in detail. While it is certain that the earthquake’s costs will affect payments and borrowings, it remains unclear what the Turkish people will face in the short, medium, and long term.
Time is naturally needed to understand the consequences in the following areas:
- Production Capacity (loss)
- Production Costs (loss)
- Government Spending (loss)
- Cost of Reconstruction (short-term loss, relative gain in the medium to long term)
- Effect on External Debt (loss)
- Already Bitter Inflation (loss)
Can we make a rational statement without waiting for time?
The economic problems facing Turkey, which began in 2014, became dire with the Covid-19 crisis. Now, with the tragic earthquake, the possibility of Turkey falling into deep helplessness is increasing.
In my view, it is very likely that the cost of the earthquake will force Türkiye to take a step back in many areas. However, it does not seem that she will compromise in her relations with the West, which she has been quietly and proudly trying to repair since the pandemic.
Muhammet Ali Zurnaci
February 26, 2023, Istanbul