IMF says quake impact on Turkey’s growth won’t be similar to 1999

Reuters

The impact of last week’s massive earthquakes on Turkey’s economic growth is unlikely to be as pronounced compared to one of similar magnitude in 1999, Daily Sabah newspaper reported, citing International Monetary Fund (IMF) executive director Mahmoud Mohieldin.

Earthquakes ravaged southeastern Turkey and severely hit northern Syria, as thousands of buildings, including homes and hospitals, were flattened.

Moreover, the disaster, which has claimed the lives of more than 33,000 people, inflicted heavy damage on roads, pipelines, and other infrastructure in the area, where some 13.5 million people live.

The earthquakes will add billions of dollars of spending to Ankara’s budget and are likely to cut economic growth by two percentage points this year, the newspaper said, quoting officials and economists.

President Recep Tayyip Erdogan said earlier that there would be a rapid reconstruction of infrastructure and houses.

The public and private sector investments in rebuilding could boost gross domestic product (GDP) growth in the future, Mohieldin said on the sidelines of the Arab Fiscal Forum.

Wolfango Piccoli, managing director of consultancy Teneo Intelligence, said last week the earthquakes are unlikely to inflict severe damage to the economy compared to one of equal magnitude in 1999 that struck Turkey’s northwest industrial area.

IMF managing director Kristalina Georgieva said the earthquakes “brought tremendous tragedy on people but also a very significant impact on the Turkish economy”.

Since Turkey has been facing high inflation and depreciation in the lira, the government has endorsed a new economic model aimed at eventually shifting from chronic deficits to a current account surplus.

The government aims at lowering inflation, which dropped to nearly 58 percent in January after scaling a 24-year high at 85.5 percent in October 2022.

Three economists calculated GDP growth could drop 0.6 to 2 percentage points under a scenario where production in the region drops 50 percent, with recovery taking between six and 12 months, the newspaper said.