Turkey quakes still taking a toll on economy one year on

Reuters/Stringer

• Total cost is $103.6bn
• Slow to replace homes
• Many workers not returning

A year on, the twin earthquakes that devastated much of Turkey’s south continue to send tremors through the nation’s economy.

The quakes on February 6 2023 inflicted a $103.6 billion hit on the Turkish economy, according to the Strategy and Budget Department of the Office of the President.

Some $85 billion of this was the cost of damage and there was a further $18.6 billion bill for loss of economic activity.

Revised data issued on February 2 showed that 53,000 people died, 107,000 were injured and more than 3.5 million were displaced across 11 of Turkey’s 81 provinces.

• Turkey secures $100m for post-quake reconstruction

• Turkey’s earthquakes revive concerns over industrial heartland

• Turkish housing crisis persists despite construction surge

Many experts, however, believe the $18.6 billion loss of economic activity figure to be understated, given the 11 provinces affected accounted for up to 10 percent of the national GDP of an estimated $1.1 trillion. Productivity is expected to be affected for years to come.

The physical toll was catastrophic, with more than 715,000 buildings damaged, 200,000 of them destroyed or beyond repair. The majority of these were residential, with 680,000 units required to replace lost housing stocks. 

With restoring infrastructure prioritised, in particular logistics and basic services, delivery of new housing has lagged.

Just 46,000 of the 300,000 units promised by the government by the end of 2023 have been handed over, another potential brake on economic recovery. 

The slow rollout of housing means workers who left the quake zone are not returning, said Abdulkadir Celenk, president of the Organised Industrial Zone in Adiyaman, one of the provinces hardest hit by the earthquake.

“Most industries within our zone are labour intensive, the majority is ready-wear for exports,” he told AGBI. “The main headwind we face is the unresolved issue of accommodation. 

“Rental prices have soared, and limited housing prevents our experienced work force from returning.”

Reuters//Umit Bektas

However, the Turkish economist Mustafa Sönmez says the paced housing rollout, along with sharp increases in interest rates, is part of the government’s broader programme to steady the economy and prevent overheating.

“The government is following a balanced strategy, construction is progressing slowly, because if speeded up the economy would see a surge in inflation,” he told AGBI.

“They will spread work over years, and not pressure building capacity.”

Though January’s consumer inflation came in at 64.86 percent, the central bank has forecast that this will ease to 36 percent by the end of 2024, in part as a result of the bank’s key lending rate being raised from 16 percent at the time of the 2023 quake to 45 percent today. 

And the International Monetary Fund has forecast that Turkey’s economy will expand by 3.1 percent this year, having grown by a projected 4 percent in 2023.

The more measured economic growth, though generating criticism for the government, along with the slower delivery of housing stock, may be part of the price to be paid for recovery from the events of February 6 2023.