Page 28 - bne Magazine Apri20

28 I Cover story bne April 2020
SOUTHEAST EUROPE
Turkey
VIRUS UPDATE
• Number of cases as of March 25: 2,433
• Number of deaths as of March 20: 59
• Comment: Turkey declared no cases of coronavirus until
the last week of March and then the cases took off. The government has been highly sensitive to independent reports on the spread of the virus and on March 25 the interior minister said 410 people had been arrested for making “provocative” posts on social media about the coronavirus outbreak and “attempting to stir unrest”. The country was the last major economy to confirm
a first COVID-19 infection. One Harvard academic
claims the situation is already “out of control”.
There is concern that Turkey has been using a system
of testing for COVID-19 under which all tests-using one particular made-in-Turkey kit approved by the government – must be analysed by a centralised unit in Ankara. Its results cannot be independently verified or challenged. Critics have said Turkey may have lost its chance to stop its outbreak snowballing to “Italy-sized” proportions as
a result of its efforts to control the reporting.
PUBLIC HEALTH MEASURES
• No lockdowns or full curfews have been brought in but Turkey has shut schools, cafes and bars, banned mass prayers, postponed sports matches and suspended flights.
• Social distancing advice and restrictions had by March 24 caused the number of passengers on inter-city buses to fall 83% and traffic intensity within 15 major cities to decline 65%, the interior ministry said.
• There have been reports that Turkey is set to place a third of its prison population of 300,000 on temporary release but Human Rights Watch is concerned that no political prisoners will be included.
• Turkish police have threatened to seize the factories of face mask manufacturers that refuse to hand over their product to the health ministry.
ECONOMIC MEASURES
• Having just emerged from a debilitating currency crisis Turkey has already used up much of its monetary and fiscal ammo prior to the pandemic.
• The finance minister has insisted Turkey is not in an “IMF situation”.
• President Recep Tayyip Erdogan on March 18 introduced a Turkish lira (TRY) 100bn ($15.4bn) package drawn up to bolster the economy in the face of the COVID-19 crisis.
It included a doubling to TRY50bn in the limit of the Treasury-backed credit guarantee fund. Postponements in debt payments and reduced tax burdens in various sectors will be brought in. Value-added tax (VAT) and social security payments for have been deferred. The tourist industry accommodation tax has been suspended until November.
• State and private banks have allowed delays in interest and principal payments, particularly in hard-hit sectors such as tourism. Some leniency is condition on companies not cutting their workforce.
• An additional 100bp rate cut was brought in at an emergency meeting along with additional cheaper liquidity for companies.
• The banking watchdog doubled to 180 days the time allowed for bank loans to remain unpaid before they are classified as non-performing loans (NPLs).
ECONOMIC FORECASTS (where available)
• The government is still sticking to its target of 5% economic growth this year.
• Moody’s said that it expects Turkey’s economy to be the hardest hit out of all the G20 economies on March 25, with a cumulative contraction of 7% in this year’s second and third quarter GDP.
• The Institute of International Finance (IIF) said thanks to the effects of very strong bank lending at the prompting of officials that had gained powerful momentum before the pandemic hit – Turkey should still eke out growth of 0.6% this year compared to the 2.2% the IIF was previously forecasting.
• Capital Economics, meanwhile, sees a contraction of 2%. The Turkish economy is very vulnerable to the pandemic effects as 13% of it is made up of tourism and 60% of services.
• The most alarming growth forecast came from JPMorgan on March 19 which said Turkish GDP might collapse by as much as 17.2% q/q in Q2.
• The Turkish lira was trading at its weakest levels since the 2018 balance of payments crisis, at around TRY6.55 to the USD. Analysts see it finishing the year at around TRY7.50.
• Official annual inflation rate rose for a fourth straight month in February, reaching 12.37% compared to 12.15% in January but moving up by slightly less than the market consensus forecast anticipated. Capital Economics sees it at around 15% by year-end.
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