I’m neither an economist nor an economy journalist. But as a political journalist trying to do my homework, consult and read the experts on the subject to understand what’s ahead.
It’s possible to go into the details, the data; but here, I would like to share with you a summary of what I can see.
There is one threat to Turkey as well as the rest of the world. That is the second wave of coronavirus outbreak, or worse, the emergence of a new virus such as COVID-19, which has the potential to evolve into a pandemic. This would have dire consequences for both the people and the economy. One look at the latest warnings of the WHO is enough. So far it seemed like 2021 could be saved but IMF predictions suggest that a second outbreak will jeopardize the upcoming year too.
Good news and bad news
If the feared second wave doesn’t come, or no other virus comes up, the thinking in Turkey’s economy might not be as bad as the 5% that the IMF, World Bank or OECD had been forecasting. One reason for this is that the domestic market is large enough to support production and economic activity in certain areas, and to a certain point. The government and the banking sector need to meet halfway. Because the low-interest loan measure looks like it has started to revive the automotive, consumer durables, and housing sectors, although not without prudential restrictions. Along with the structural measures, there may be a rise in agriculture and animal husbandry, and there should be.
However, the same is not valid for some sectors, especially those which are important in terms of hot money and cash inflows. Tourism, transportation, and retail come to mind. There may also be serious problems in education, as well as energy, sports, and the entertainment industry, which may result in permanent changes. But not on the same scale as in tourism, transportation, and retail. One of the high priority issues on Turkish Foreign Minister Mevlüt Çavuşoğlu’s agenda is to attract German and Russian tourists to the Mediterranean resort Antalya, his home town. The main reason for this is that investors in these three sectors are unable to come to terms with the fact that the rules of the game have changed for a very decisive reason such as health. And still, look to the government for support. An economist can certainly see the shape of the Turkish economy better but you don’t need to be an economist to see major risks ahead of Turkey. It looks like some tourism businesses, transportation companies, and shopping malls will go bankrupt and shut down. And in any case, it looks like the era of the shopping mall is drawing to a close across the world, along with some areas of the tourism sector.
Permanent unemployment risk at the gates
Still, the most serious problem will be unemployment and the cost of living. President Tayyip Erdogan is delaying the issue by extending the layoff bans for three more months, hoping for recovery until then. Businesses haven’t already started mass layoffs. But they have already found ways to reduce their staff by running “performance criteria” checks through their human resources departments. However, once the ban ends, the real unemployment problem will come to light. Then, the rose-tinted statistics that the Turkish Statistics Institute (TUIK) has been announcing may no longer make sense.
Of course, there is yet another dimension to the employment problem that the coronavirus has so far overshadowed. That problem is digitalization and production automation, which we had been watching in awe for some time. Many large companies are discussing automation and the use of industrial robots. They want to go down that lane both to avoid labor wage and unionization issues, as well as lower costs and increase profitability. On the other hand, part-time and remote work await office workers; with lower wages, of course.
This means permanent, or long-term unemployment. Youth unemployment and permanent unemployment are threats that can have serious effects on the economy as well as on social and political life.
In the coming weeks, it is necessary to look at the decisions that the government will take in the field of economy and politics.