Turkey earthquake could mean loss of up to 1% of GDP in 2023

Reuters

The devastating earthquake in Turkey could result in a loss of up to one percent of the country’s gross domestic product this year, the European Bank for Reconstruction and Development (EBRD) said in a report published on Thursday.

The bank added this is a “reasonable estimate” due to the expected boost from reconstruction efforts later this year, which will offset the negative impact to infrastructure and supply chains.

“The earthquake affected to a large extent agricultural areas and areas where there is light manufacturing, so spillovers to other sectors are limited,” EBRD chief economist Beata Javorcik told Reuters.

The devastating earthquakes in Turkey and neighboring Syria on February 6 have killed more than 41,000 people and left millions in need of humanitarian aid, with many survivors having been left homeless in near-freezing winter temperatures.

Growth for Turkey, the single biggest recipient of EBRD funds, has been revised down to three percent from 3.5 percent in 2023, without considering the impact of the earthquake in the estimates.

The bank added that growing external financing requirements and political uncertainty associated with elections in 2023 create significant economic vulnerabilities.

Turkey’s earthquake has thrown into disarray plans for elections to be held by June, sparking frantic debate within President Tayyip Erdogan’s government and the opposition over a possible delay.

“As depreciation of the Turkish lira outpaced inflation since 2015, Turkey’s exports have been growing fast, benefiting from lower costs expressed in US dollars,” the report added.

Turkey’s lira hit a fresh record low on Wednesday.