The destruction in Turkey and Syria is enormous.
(Photo: AP)
Antalya It was a catastrophe of a century: The earthquake in Turkey and Syria last Monday killed tens of thousands of people and millions lost their homes.
The World Bank has already pledged $1.78 billion (€1.65 billion) in support for Turkey to help with reconstruction. 13 million people live in the ten affected provinces, and the earthquake has massively affected all economic sectors in the region.
There are now initial calculations of the damage balance. The experts at the US company Verisk Analytics, who specialize in natural disasters, estimate the economic damage from the earthquake in Turkey and Syria at more than 20 billion dollars. Only a fraction of it – a good one billion dollars – is insured.
“The difference between economic and insured losses — the coverage gap — shows how expensive disasters are to society,” said Verisk executive Bill Churney. The state has to bear most of the uninsured damage.
Agriculture is particularly important in south-eastern Turkey, where companies contribute 14.3 percent to national income. 8.7 percent of Turkish exports come from this region, the majority, however, from the province of Gaziantep, which is only selectively affected. Nearly $20 billion worth of goods were exported from the region last year.
The southeast of Turkey is mainly characterized by agriculture.
(Photo: dpa)
The private Turkish company and business association Türkonfed estimates that the damage could amount to up to 84 billion US dollars. Accordingly, Turkey lost around ten billion US dollars in economic power as a result of the quake, which corresponds to around 1.2 percent of gross domestic product. Added to this are more than $70 billion from damaged and destroyed buildings and around $3 billion from lost work hours.
The association’s analysts assume more than twice as many deaths as previously known, as well as around one million buildings destroyed. So far, 36,000 deaths have been confirmed in Turkey and 5,900 in Syria. The fact that the stock market has lost ten percent since the series of earthquakes has not yet been taken into account here.
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The major US bank Goldman Sachs also expects Turkey to lose around one percent of its economic power as a result of the quake. Most recently, after the corona pandemic, the economy grew at rates of up to 11.4 percent per year. For 2023, analysts are expecting national economic growth of three to 3.5 percent.
The various regions of Turkey are economically closely interwoven, which is why negative effects are also feared at the national level. “Recovery will be gradual and not before 2024,” write analysts at Washington’s Middle East Institute in an analysis. A growth loss of two to 2.5 percent is possible.
Important economic regions of the country not affected
However, the reconstruction also sparks new economic activities. This could cushion some of the damage caused to the economy. The fact that important parts of the Turkish economy are still intact also speaks in favor of a relatively rapid recovery. The tourism areas, which are important sources of foreign exchange for the country, were spared the earthquake.
The tourist regions of Turkey are largely intact.
(Photo: Anadolu Agency/Getty Images)
Not all of the infrastructure was destroyed in the earthquake region either. Several major transport routes remained intact, as did the port of Iskenderun, the dams, major oil pipelines and airports.
The Turkish government imports less gold
Nevertheless, the government switches to crisis mode. Turkey will suspend some gold imports as part of an emergency plan to mitigate the economic fallout from the earthquakes, an official told Bloomberg news agency. Turkey is investing in the precious metal as a hedge against rampant inflation and the fall of the lira.
How the series of earthquakes will affect monetary policy is still unclear. In any case, the money that Turkey now has to raise on the capital markets for reconstruction could continue to drive inflation in the country.
The effects of the catastrophe on the elections in May could be more immediate. On the one hand, because the country now needs money to push ahead with reconstruction. On the other hand, because financially disadvantaged people are probably more inclined to blame the government for their situation.
The Turkish insurers also play a role here, having had to pay out more money to their customers in recent years than they were taking in. It is possible that some insurance companies will pay out money late – and the value of the sums could be directly decimated by inflation. If this happens in the hot phase of the election campaign until May, the government could also be blamed for it.
President Recep Tayyip Erdogan apparently wants to prevent this. Immediately after the earthquake, his government promised all those affected an immediate payment of 10,000 lira, around 500 euros. Earlier this week, Erdogan announced that he would pay all relatives of the deceased an additional 100,000 lira (about 5,000 euros).
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