Podcast
Turkey's looming economic crisis
As conditions worsen for the households, prospects get darker. It appears that the first wave of the health crisis will be over soon. Brace yourself for the economic downturn that it will leave its wake. That is of course until the pandemic’s second wave.
The COVID-19 crisis has been an unprecedented experience for all of us. Amid the first pandemic the world has seen in the past 100 years, last week, the world experienced yet another historic milestone. For the first time in recorded history, the price of West Texas Intermediate (WTI) oil contracts went below zero due to diminished demand and insufficient storage capacity. This demonstrates the extent to which the COVID-19 crisis has and will impact the world economy.
Aside from that, the overall slowdown in economic activity has led companies to cease their operations and minimize costs, which means millions of people will become unemployed in the upcoming months. Governments across the world have announced economic stimulus packages to support companies and employees. On top of the 100 billion Lira stimulus package announced by President Erdoğan, in the second week of April, the government banned layoffs for 3 months and announced that 1,170 Turkish Liras per month will be provided to people who are on unpaid leave for the next three months.
While the Turkish economy showed signals of recovery in the few months prior to the pandemic, the overall state of the economy was far from healthy. Unemployment has been high since January 2019, and as of January 2020, the overall unemployment rate is 13.8%. Youth unemployment, meanwhile, stands at 24.5%. Besides, the USD vs. TL exchange rate is at an all time high, getting closer to 7.00 each day.
In this context, for our April survey at Türkiye Raporu, we decided to ask the question ““Which of the following did your family experience due to the economic crisis caused by the coronavirus?” in order to understand the effects of the crisis on individuals. We asked the same question in both of our April surveys, which allows us to analyze the changes that took place in the past two weeks.
Overall results show that getting laid off and unpaid leave are the two most essential problems that individuals are struggling with. These are also the only two statements that increased compared to the first week of April. To be more specific, while the percentage of participants that picked the statement “Termination of employment” was 25.5%, this percentage rose to 41.8% in mid-April.
Considering the fact that the three-month layoff ban was announced between these two surveys, one can say that most of the layoffs took place for unregistered employees. Moreover, the percentage of participants who picked the option “Leave without pay” increased from 26.4% to 37.1% in mid-April. This shows that the government’s decision to provide 1,170 TL per month to those on unpaid leave was on the spot.
Other statements such as “Decrease in salary” and “Loss of revenue in personal business” decreased compared to the results in the first week of April. While the percentage of participants that picked the statement “Decrease in salary” was 23.8% in the beginning of April, this percentage dropped to 17.4% in mid-April.
The largest difference among all statements occurred with the statement “Loss of revenue in personal business” with a decrease of 19%. The percentage of participants who picked this statement was 26.9% in mid-April, which is significantly lower compared to the 45.4% in the first week of April. Finally, the percentage of participants who picked the statement “None” decreased by 9%. This means that compared to two weeks ago, more individuals are exposed to the effects of the crisis. Based on the overall results, they are mostly affected through termination of employment and leave without pay.
In addition to these figures, in our monthly economics expectations survey, the share of people who stressed that the economy will be “much worse” in the next 12 months since the beginning of 2020 has reached its highest share with 28%. As conditions worsen for the households, prospects get darker. It appears that the first wave of the health crisis will be over soon. Brace yourself for the economic downturn that it will leave its wake. That is of course until the pandemic’s second wave.