On February 6, 2023, another tragedy struck as Turkey and Syria experienced a 7.8 magnitude earthquake. The human cost of this is, of course, the most important factor and is absolutely incalculable. Today, though, we’re going to look at how such natural disasters can impact a national economy. Following that, we’ll give you the lowdown on market events this week.
1% GDP drop
Most national economies are struggling at the moment and before the earthquake, Turkey was no different. The pandemic hangover continues, while logistical challenges hit trading volumes, and the coming recession looms ever larger.
The energy crisis and war in Ukraine have further dented the Turkish economy over the last 12 months. But now, due to the devastating earthquake, the European Bank for Reconstruction and Development (EBRD) has estimated that the tragedy could lead to a loss of up to 1% of the country’s gross domestic product this year.
The EBRD highlighted that this number factored in the probable boost that reconstruction efforts will likely bring to the economy later in 2023.
Lira dips to record lows
News of that potential big drop came alongside a very real one, with the Turkish Lira hitting a record low on Wednesday.
Before the disaster, Erdogan’s government had been suppressing interest rates, even in the wake of rising inflation, which has further damaged the lira’s position against the dollar.
The Turkish currency has lost 27.5% of its value against the dollar over the last 12 months, severely damaging Turks’ purchasing power.
TRY/USD, 12 months
All this comes in a crucial year for Turkey and incumbent President Erdogan who is up for re-election in mid-May.
Many are now looking to the president to explain why so many buildings were so poorly constructed and maintained and therefore not resistant to such disasters .
There’s a lot to be said for preserving the status quo, and Erdogan has not been a boat rocker in that sense. However, his regime’s strangling control over many aspects of Turkish life remains controversial. He’s also constructed a difficult economic scenario in which inflation is running at 80%, but he needs to keep the currency stable between now and the election.
Such a situation is not sustainable, of course, and is actually digging a very deep hole for the Turkish economy.
Whether Erdogan, who has been in power since 2014, remains in power or not, will likely have a huge impact on Turkey’s political, economic, and diplomatic future.
What do you think of Turkey’s economic outlook? Let us know at @_contentwork.
Top trading events week commencing 20.02.23
There’s a fair bit going on this week, here’s when and where you need to tune in.
No major events are planned. US Market closed for President’s Day
● CAD — Core Inflation Rate MoM (JAN); Core Inflation Rate YoY (JAN); Inflation Rate YoY (JAN)
● NZD — RBNZ Press Conference
● EUR — Germany Inflation Rate YoY Final (JAN); Germany Ifo Business Climate (FEB)
● EUR — Core Inflation Rate YoY Final (JAN)
● USD — GDP Growth Rate QoQ 2nd Est (Q4)
● JPY — Inflation Rate YoY (JAN)
● EUR — Germany GDP Growth Rate YoY Final (Q4); GfK Consumer Confidence (MAR)
● USD — Core PCE Price Index YoY (JAN); PCE Price Index YoY (JAN); Michigan Consumer Sentiment Final (FEB)
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The Contentworks team