Impact of earthquake on Turkey- February 2023
Turkey faces a difficult road to economic recovery following massive earthquakes that crippled critical infrastructure, with the death toll still on the rise. CNBC reports at least 6000 buildings have collapsed, trapping residents inside, with domestic and foreign responders joining forces in the rescue effort. Much scrutiny has fallen on the handling of the crisis by the government, including criticism directed at the speed of search efforts as well as the unpreparedness of infrastructure to handle the earthquakes, despite decades old taxes to fund earthquake-resistant buildings. This falls months before the upcoming presidential election, where president Erdogan will be seeking another term.
This disaster comes about in a time of economic strife for Turkey. The economy has faced the brunt of high global energy prices, with the war in the Ukraine and the hangover effects of the pandemic materially affecting economic stability. As such, the country is in the midst of a cost of living crisis, with inflation reaching as high as 80% in the third and fourth quarter of 2022. Unconventional policy have further plagued attempts at normalising key indicators. President Erdogan’s artificial suppression of interest rates have plummeted the lira to a low, diminishing the buying power of the currency. This has in turn ballooned the size of the current account deficit. Nonetheless, there are mechanisms in place yet to be tapped into to help stabilise the economy. Turkey’s public debt-to-GDP ratio sits at 34%, indicating room for spending. Current aid efforts have further loosened the burden for the Turkish government. Still, the country faces challenges to recovery, including dealing with the aftermath of the earthquake that is sure to be at the top of its priority.