Country Information
The Republic of Turkey is a country in Europe. Although officially recognized as part of the European Union, Turkey is a transcontinental nation whose region spans from western Asia’s Anatolian peninsula to the Balkan peninsula located in south-eastern Asia (The World Factbook). The East Thrace region is the only part of Turkey situated in Europe. The latter is separated from the Anatolia peninsula by the sea of Marmara, which together with the Bosporus and the Dardanelles forms the Turkish Straits (The World Factbook). Turkey boasts of vibrant cities such as Ankara, which is the nation’s capital and Istanbul, the country’s largest city (The World Factbook). The majority of the citizens are of Turkish origin, while the Kurds form the largest minority group.
Governance
Turkey is a presidential republic where the president assumes the roles of head of state and head of government. Although the head of state is required to provide guidance and leadership to all institutions of government, the nation’s constitution contains a balancing mechanism where power is shared between different levels of government (The World Factbook). As such, authority is shared between the executive, legislature and the judiciary. On the one hand, the president heads the executive branch, which comprises the council of ministers (The World Factbook). Turkey’s legislative power rests with the legislature known as the Grand National Assembly. The judiciary is the third branch of Turkey’s government (The World Factbook). In general, although Turkey is a presidential republic with an imperial presidency, the country’s constitution ensures the balance of power between different branches, i.e. the executive, legislature and judiciary under the doctrine of separation of powers.
Economy and Monetary Policy
Turkey is a relatively prosperous economy. Indeed, according to the world bank, the country’s estimated nominal gross domestic product stood at $771.35 billion, which accounts for approximately $8958 per capita and $ 2.4 trillion in purchasing power parity (“Turkey”). The stellar economic performance informs turkey’s favourable position as the 19th largest economy in the world and the 13th largest in terms of purchasing power parity (The World Factbook). As one of the world’s premier economies, Turkey is a member of the G20 and the organization for economic co-operation and development (OECD) (The World Factbook). In general, Turkey is a relatively stable economy, a factor that informs its G20 membership.
Turkey’s economy has grown tremendously over the last two decades, mainly due to favourable economic and governance reforms. In particular, the country has undergone a vast economic and social transformation since the early 2000s. According to the world bank, the economic reforms enacted in the early 2000s led to increased employment and rising incomes (“The World Bank in Turkey”). This aspect explains Turkeys ranking as an upper-middle-income economy. In addition to the economic reforms, the government has maintained a consistent long-term focus on ambitious projects, mainly targeting the vulnerable and historically disadvantaged groups (“The World Bank in Turkey”). Such improvements and projects have seen a reduction of poverty levels almost by half from 2002 to 2015 (“The World Bank in Turkey”). In sum, economic and governance reforms mainly those enacted in the early 2000s have been instrumental in revamping and modernizing Turkey’s economy.
Economic Slowdown and Government Response.
Despite experiencing stellar economic growth since the 2000s, Turkey’s economy experienced a slowdown in 2018. Yekeler contends that in 2018, the economy posted a 7.4% and 503% growth rate in the first and second quarter, respectively. In the third quarter, the economy performed dismally after posting a 1.8% growth rate (Yekeler). The 2018 figures represent the sharpest economic reversal since the financial meltdown of 2008/2009 (Yekeler). In response to the dismal economic performance, Turkey’s government enacted several policies aimed at boosting investment and stimulating economic growth. In particular, the Erdogan administration adopted a monetary easing policy, ostensibly to minimize inflation (Kucukgocmen and Alison). Generally, the monetary easing policy has helped the economy recover (Kucukgocmen and Alison). However, many economic sectors are still struggling. In general, the Turkish government adopted a monetary easing policy in response to the economic slowdown witnessed in 2018.
Response to The Coronavirus Pandemic
Just like many other countries, Turkey is currently battling the coronavirus pandemic. The state reported its first coronavirus case on March 11th 2020 (Guerin). Four days later, on March 15th, the country recorded its first corona related death. Initially, the government’s response to the pandemic was sluggish, and as a result, the rate of rose significantly in the first two weeks (Guerin). Indeed, by April 1st, the disease had spread all over Turkey, making it one of the countries with the highest infection rates. Despite the rising number of cases, the Turkish government, through the ministry of health downplayed the infection rate (Guerin). For example, in April, the health minister announced that the infection rate had reached its peak and that infections would reduce in the coming weeks (Guerin). Overall, Turkey’s initially slow response to the coronavirus pandemic caused a sharp increase in the infection rates.
Despite the government’s prediction that infections would reduce by the fourth week of April, the infection rate went up. For instance, by the start of June, the number of coronavirus cases had surpassed one hundred thousand, while the number of deaths exceeded four thousand (Eski). Despite the increasing number of corona positive cases and deaths, the Erdogan administration adopted a moderate response. For example, unlike many other countries that opted for total lockdowns, Turkey opted for partial lockdowns. Only those aged over 65 and those under the age of 20 were placed under complete lockdown (Guerin). Other measures deployed include weekend curfews and restriction of movement within the major cities (Guerin). In general, Turkey adopted a moderate response to the Covid 19 pandemic, specifically by enacting both partial and complete lockdowns.
The Impact of Covid 19 On the Economy
The Covid 19 epidemic and associated lockdowns and containment measures have caused significant negative consequences on the Turkish economy. In particular, the disease has caused a decline in both supply and demand (Demiralp). The decline in supply is attributed to the fact that those infected with the virus are dropped out of the workforce in order to minimize further infections (Demiralp). Thus, with a reduced workforce, companies are no longer producing optimally hence occasioning supply challenges. In addition, the move to close down businesses offering non-essential services as a containment measure has further caused a significant reduction in the supply of goods and services, hence undermining people’s income (Demiralp). On the whole, the need to contain the spread of Covid 19 and the associated lockdowns has occasioned supply challenges.
Significant changes in consumption patterns have resulted in a considerable decline in the demand for goods and services. Undoubtedly, the severity of Covid 19 and the fast rate of infection has scared many Turkish citizens, thus causing the majority to restrict their movements. Such personal initiatives aimed at minimizing the chances of one contracting the virus have resulted in a significant reduction in the number of people visiting shopping centres, an aspect that explains the decrease in the demand for goods and services (Demiralp). The uncertainty surrounding the disease, especially doubts on the resumption of normalcy has informed precautionary saving among people hence occasioning a reduction in consumption (Demiralp). Unfortunately, the decrease in demand has resulted in the loss of jobs and income. In general, the coronavirus pandemic has caused a decline in consumption and demand for goods and services.
Conclusion and recommendations
The 2018 economic meltdown caused significant negative consequences on the Turkish economy. In particular, the mild recession caused massive job losses and reduction in income levels, hence predisposing many people to poverty. Although the government’s monetary easing policy played a critical role in stimulating economic growth, the majority of the country’s commercial sectors continued suffering. The Covid 19 pandemic has exacerbated the challenges faced by Turkish citizens. For example, the containment measures enacted by the government, such as restriction of movement, partial and total lockdowns and closure of businesses has left many disadvantaged economically. Indeed, Covid 19 and its associated challenges have caused demand and supply shortages, the result of which is massive job losses. In general, Covid 19 has undermined the Turkish economy in many respects.
In my view, the economic dent on the Turkish economy following the coronavirus pandemic is so severe, and there are chances that in the absence of prudent economic and fiscal policies, the economy might not recover. The decline in demand and supply and the subsequent massive job losses inform my assertions. Even before the emergence of the coronavirus, the Turkish economy, as outlined earlier, had started experiencing mild recessions. It is, therefore, logical to conclude that Turkish citizens were suffering economically long before the enactment of lockdowns and curfews as disease containment measures. Thus, continued loss of income following the lockdowns and closing of businesses means that the majority of businesspeople will face challenges bouncing back even after normalcy resumes. Overall, the economic challenges occasioned by the financial meltdown of 2018 and corona pandemic creates a bleak economic future for the Turkish people.
Keynesian Economics
Given the challenges mentioned above, there is an urgent need to adopt the Keynesian approach in stimulating economic growth. The principles are best placed to respond to the financial difficulties bedevilling Turkey. According to Bertocco and Andrea, Keynesian economics advocate for increased government expenditure in order to boost demand and economic growth (2). Proponents of Keynesian economics believe that increased consumer demand is the main driving force behind economic growth. Accordingly, the model posits that an increase in government spending enhances the circulation of money in the economy hence a surge in consumer demand. Gatawa, Akinola and Muftau cautions against overuse of such economics, arguing that uncontrolled government spending can cause inflation (26). In general, moderate application of Keynesian economics will help stimulate Turkey’s economic growth in the wake of the coronavirus pandemic.
In line with Keynesian economics, the Turkish government should increase spending critical sectors such as infrastructure. Generally, increasing spending on infrastructure will stimulate economic growth by causing a ripple effect on the economy. Specifically, such projects have the potential to cause an increase in the demand for goods and labour, which is necessary for economic growth. Unemployment benefits are also a crucial part of Keynesian economics. According to Demiralp, paying the unemployed enhances their spending ability, ultimately causing an increase in the circulation of money. However, in my view, such payments should only benefit those operating in the sectors worst hit by the coronavirus pandemic. Overall, the Turkish government should consider increasing spending on infrastructure projects in order to stimulate the struggling economy.
Besides increasing expenditure, the Turkish administration should reconsider its decision to impose total lockdowns. Although partial lockdowns allow business people to operate at specific hours, the complete lockdown imposed on sections of the population prevents them from engaging in economic activity, hence predisposing them to poverty (Demiralp). Accordingly, there is a need to lockdown policies that allow people to engage in commercial activities while observing precautionary measures. For example, instead of total lockdowns, the administration should impose partial lockdowns and enable people to work so long as they adhere to the prescribed health measures. On the whole, the Erdogan administration should enact favourable disease containment measures that can allow people to engage in economic activity.
The enactment of an economic stimulus program to help mitigate the impacts of the financial meltdown occasioned by coronavirus is a feasible idea. Presently, Turkey’s economic relief package is approximately 4.5% of its GDP (Demiralp). Such an amount is substandard in the wake of increasing numbers of individuals in need of financial assistance. Thus, the government should devise ways of improving the economic stimulus budget in order to cover the majority if not all of the individuals adversely affected by Covid 19. Generally, providing needy cases with a stimulus package will enhance spending and production, both which are vital for economic growth. Overall, ensuring that those worst affected by the coronavirus pandemic benefit from an economic stimulus kitty will enhance not just spending but also cause ripple effects on the economy.
Works Cited
Bertocco, Giancarlo, and Andrea Kalajzić. “The Relevance of Post-Keynesian Economics.” History of Economic Ideas 24.1 (2016): 155-166.
Demiralp, Selva. “The Economic Impact of COVID-19 on Turkey” Middle East Institute, 2020 www.mei.edu/publications/economic-impact-covid-19-turkey Accessed 20 June 2020.
Eski, Beril. “How Politics Derailed Turkey’s Pandemic Response” Politico, 2020 www.politico.eu/article/coronavirus-turkey-pandemic-response/ Accessed 20 June 2020.
Guerin, Orla. “Coronavirus: How Turkey Took Control of Covid-19 Emergency” BBC, 2020 www.bbc.com/news/world-europe-52831017 Accessed 20 June, 2020.
Gatawa, N. M., Akinola Abdulgafar, and Muftau O. Olarinde. “Impact of money supply and inflation on economic growth in Nigeria (1973-2013).” IOSR Journal of Economics and Finance (IOSR-JEF) 8.3 (2017): 26-37. doi: 10.9790/5933-0803042637
Kucukgocmen, Ali, and Alison Williams “IMF Says Turkish Monetary Easing Went ‘Too Far’, Calls for Neutral Fiscal Policy In 2020” Reuters, 2019 www.reuters.com/article/us-imf-turkey/imf-says-turkish-monetary-easing-went-too-far-calls-for-neutral-fiscal-policy-in-2020-idUSKBN1YV1DG Accessed 20 June 2020.
The World Factbook. “Introduction to Turkey: Background” Central Intelligence Agency, www.cia.gov/library/publications/the-world-factbook/geos/tu.html Accessed 20 June 2020.
Yekeler, Zeynep. “The Turkish Economic Slowdown in 2018” Centre For Strategic International Studies (CSIS), www.csis.org/analysis/turkish-economic-slowdown-2018 Accessed 20 June 2020.
“Turkey” The World Bank, data.worldbank.org/country/turkey Accessed 20 June 2020.
“The World Bank in Turkey” The World Bank www.worldbank.org/en/country/turkey/overview Accessed 20 June 2020.
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