The global economy was first hit by the COVID-19 pandemic in 2020, before the US-China tensions could stave off. In the following years, the Russia-Ukraine War and the accompanying global food and energy crises turned into challenges that were reflected in the costs.
In addition to these disasters, the Turkish economy has also struggled with the repercussions of the destruction caused by currency attacks, natural disasters affecting different parts of the country due to climate change, and finally the earthquake in Kahramanmaraş, which is described as the disaster of the century.
The developments since the beginning of the COVID-19 epidemic, which caused severe economic consequences as well as humanitarian and social problems, when countries had to close their borders, lock the doors of production sites, have led the Turkish economy to produce difficult policies. While the service sector remained standing thanks to the bail supports provided to the business world, new business model solutions and health measures taken during the epidemic, the wheels of the industry turned.
Faced with speculative currency attacks at the end of 2021, when the effects of the epidemic began to wane and the economic recovery continued, the Turkish economy responded with currency-protected deposit and participation account (KKM) applications. Thanks to the KKM system implemented under the coordination of Treasury and Finance Minister Nureddin Nebati, high volatility in exchange rates was prevented, while investors were protected against exchange-indexed manipulations.
After the epidemic, the war shook the balance
While the whole world is just starting to get rid of the effect of the epidemic, this time the Russia-Ukraine War turned all the balances upside down. Shipments from Ukraine, which is described as the “granary of the world”, stopped completely for a while. The increase in prices due to the global food crisis, which increased as the conflicts continued, confronted the countries with the problem of inflation. The import ban of the European Union (EU) countries for various refinery petroleum products such as diesel and liquid fuel (fuel-oil) transported from Russia by sea and the ceiling price application for these products also deepened the energy crisis. Dilemmas in both energy supply and food shipments have put millions of people around the world at risk of dying from food shortages. This acute situation in the global food crisis was resolved with the Grain Corridor Agreement, as a result of the talks that President Recep Tayyip Erdoğan described as “leader politics”.
While Turkey was struggling with natural disasters such as fire and flood during all these global bottlenecks, the earthquakes in Kahramanmaraş and Hatay, which caused the disaster of the century, resulted in heavy economic consequences in infrastructure, housing and physical assets in social areas, as well as loss of life. In the report prepared by the Presidency of Strategy and Budget, it was estimated that the total burden of the disaster caused by the earthquakes in Kahramanmaraş and Hatay on the Turkish economy was approximately 2 trillion liras (103.6 billion dollars). While Turkey continues to heal the wounds, it repairs damaged infrastructures and builds permanent residences for citizens who lost their homes in the earthquake. On the other hand, in this period, in which in-kind and cash supports are also provided to earthquake victims, many economic issues such as retirement age (EYT), incentives for SGK employees, family support programs, debt restructuring arrangements, and increases in pensions are implemented.
“A potential that will completely change the picture has opened up”
Istanbul University Faculty of Economics Lecturer Prof. Dr. Sefer Şener told Anadolu Agency (AA) that the global developments in the last 10 years have removed many conventional behaviors and said that the commercial and political tensions between the United States and China, which started in 2017, reached the highest level with the COVID-19 epidemic, which deeply affected the world immediately after.
Noting that the epidemic pushed the world into new economic behavior patterns, Şener stated that there were new global and regional economic organizations, new alliances and major breaks in the supply chain rings.
Pointing out that the expansionary monetary policies implemented due to the epidemic made inflation a major problem for the USA and the world, Şener said that there was a great increase in food prices and then energy prices, and when supply difficulties were added, a large inflation was encountered on a global scale.
Expressing that the ensuing Russia-Ukraine War made the process even more inextricable, Şener said:
“In the last three years, in which such big problems have been experienced, the Turkish economy has succeeded in a positive separation in many areas, especially in macro terms. While the global economies have shrunk due to the pandemic and the Russia-Ukraine War, the Turkish economy has been one of the rare countries that managed to maintain its growth. ,9, recorded a growth of 11.4 percent in 2021 and 5.6 percent in 2022. Turkey did not interrupt production during and after the pandemic, exceeding 250 billion dollars in exports, and an annual export growth trend of up to 25 percent was achieved. Industrial production did not slow down during the pandemic period. Significant employment arrangements were made during the pandemic period, many measures were taken to prevent people from losing their jobs, from short-time working allowances to dismissal bans and unpaid leave applications. Many new instruments were developed so that production and employment would not slow down. Turkey was the fastest way to the pandemic process. succeeded in being one of the countries that reacted and achieved success. With its policy, Turkey has also made the most positive contribution to the Russia-Ukraine War in the world. Turkey’s effort and success in creating a Grain Corridor has managed to get the world out of a major food and supply crisis.”
Şener also pointed out that the new natural gas reserves in the Black Sea and the efforts to make Turkey an important natural gas center in terms of the world have led the country to create a new power source in economic terms, and said, “The long-term economic effects of the found reserves are positive for Turkey. Financing the current account deficit, contributing to inflation, reducing the need for borrowing from abroad in the long term, making the Turkish economy more resilient, increasing employment, increasing bargaining power in new contracts, becoming more competitive in exports, establishing a center where gas prices are determined. and a potential that will completely change the economic picture in the long run. Turkey is not only a country where energy is transited through its territory, but also a successful country in becoming an energy, trade and logistics center. Energy independence is an important criterion for economic and political power and independence.” said.
Reminding that Turkey has been in a great struggle against disasters, especially earthquakes, Şener said that important steps have been taken in this sense.
Şener pointed out that the efforts to solve long-term problems such as EYT and increase the income of the employees are also noteworthy, and noted that the adoption of a policy focused on production, employment and exports constitutes a roadmap that will make significant contributions to the welfare of the society in the coming stages.
“Those who carry out production in a balanced way with the real economy and the financial system are on the right path”
Istanbul Arel University Faculty of Economics and Administrative Sciences Faculty Member Assoc. Dr. Cüneyt Dirican also said that with the technological acceleration after 2000 and the 2008 global financial crisis, a period in which extreme risks called “black swans” are frequently experienced and will be experienced.
Dirican states that after the 3rd Industrial Revolution at the beginning of the 20th century and the Depression of 1929 that followed the 1st World War, the economies experienced demand-side problems, the 4th Industrial Revolution at the beginning of the 21st century, the problems in the Middle East and the increasing nuclear power with the Russia-Ukraine War. He explained that the risk of war continues with the 2020 COVID-19 epidemic, global inflation and banking crisis, and that the economies are experiencing supply-side problems.
“Those who carry out production in a balanced way with the real economy and the financial system are on the right path. There will be many changes in the global economy.” Dirican drew attention to the recent fluctuations in bond rates, which are also seen in the balance sheets of Switzerland, Japan, England and the Fed’s balance sheets. Dirican stated that the increasing interest burden of the Fed and the US treasury, the budget deficits of developed economies, the sticky inflation process and the problem will spread further in the coming years.
Dirican, “In the coming period, it will show us how we will eliminate the current account balance scissors gap, and whether we will try to reach the balance with the financial economy or the production economy.” he said.