What effects the earthquake will put over Turkish economy?

Officials and economists have expressed their expectations that economic growth in Türkiye will be affected this year, as a result of the devastating earthquakes that struck the country, resulting in thousands of victims.

CNBC revealed that the earthquake will lead to a decline of 1.6% for 8 years in Türkiye’s GDP per capita.

Experts said major earthquakes in Türkiye would add billions of US dollars in spending to Ankara’s budget and cut economic growth by two percentage points this year as the government would have to undertake massive reconstruction efforts before a crucial election.

Thousands of buildings, including homes and hospitals, as well as roads, pipelines and other infrastructure, were severely damaged in the region, which is home to about 13.4 million people.

While officials say the full extent of the damage is not yet clear, they believe the reconstruction will put pressure on Türkiye’s budget.

Turkish banks revealed that the Turkish banking sector was exposed to loans in that region of more than 500 billion liras ($26.5 billion), which is equivalent to less than 10% of total loans, according to Bloomberg Intelligence calculations.

The Turkish Stock Exchange also suspended trading for the first time in 24 years, after losses continued for 3 consecutive days, wiping out about $35 billion from the benchmark stock index this week.

The last comment to trade was in 1999 after the great earthquake that struck the northwestern Marmara region, according to Bloomberg.

“There’ll be billions of dollars in damage,” a senior official told Reuters, adding that there would be a need for rapid rebuilding of infrastructure, homes and factories.

Türkiye has been suffering for years from high inflation rates and the collapse of the currency, and Türkiye has much lower debt levels than most countries, but the shrinking foreign exchange reserves for years have had an impact.

The earthquakes hit the country at a time when government policies gave priority to production, exports and investments in order to boost economic growth, despite inflation reaching more than 57%.

The earthquakes are also expected to damage production in the affected areas, which account for 9.3% of Türkiye’s gross domestic product.

Data from the Energy Exchange in Istanbul showed a decline in electricity use in Türkiye by 11% on Monday compared to the previous week, reflecting the impact on consumption.

And such damages would affect Türkiye’s economic growth this year.