[ad_1]
The Turkish economy collapsed. Despite the measures taken by the government. There has been no such decline since 1998, when similar surveys were conducted in the country.
The coronavirus crisis has caused an unprecedented collapse in Turkey’s economic situation. According to the Turkish Statistical Office, GDP fell 11% in the second quarter compared to the first three months of 2020. This is the largest decrease since 1998, when similar surveys were conducted in the country.
Compared to the second quarter of last year, a decrease of 9.9% was reported. This collapse is serious, but in fact an even worse development was expected. The concerns were a 10.7% drop in GDP. Turns out, Turkey is still less affected than other countries with booming economies.
Turkey’s problems
The country suffers especially from the reduction in the influx of foreign tourists. Due to travel restrictions caused by the pandemic, significantly fewer foreigners arrived in Turkey than in recent years.
The production of cars and auto parts is also severely affected by the pandemic, Handelsblatt points out, recalling that Turkey is the fifth largest producer of this field in Europe. In 2019 alone, 1.5 million new cars rolled off Turkish production lines, and 30 of the top 50 auto parts suppliers produce in Turkey. The problem is that 80% of exports from this area are destined for Europe. And significantly fewer new cars are being sold today than usual. As a result, the downward pressure on Turkish production is increasing significantly. “Competition between manufacturers will be deadly,” Alper Kanja, president of the Union of Automobile Parts Suppliers (Taysad), told Handelsblatt.
Rescue measures don’t help
Turkey has tried to mitigate the effects of the pandemic by increasing public spending, with more liberal monetary policies and loan programs. But the cheap money policy has put heavy pressure on the national currency.
Due to the combination of relatively low interest rates and high inflation, the real interest rate, which is important to investors, moves in the negative sphere. This is causing an outflow of foreign capital, which Turkey desperately needs. To increase the attractiveness of the Turkish lira, the Central Bank could increase the key interest rate. However, President Erdogan has repeatedly declared himself an “enemy of interest rates.”
Despite the huge depreciation of the pound, the Central Bank left the key interest rate at 8.25 percent. Previously, the key interest rate was reduced for almost a year from 24% to its current level, in order to revive the economic situation.
Turkey
[ad_2]
