The European Bank for Reconstruction and Development (EBRD) has said that the potential economic effects of the earthquake in Turkey could result in a loss of up to 1% of the country’s gross domestic product this year.
The bank also said that it was a “reasonable estimate” due to the expected boost from reconstruction efforts later this year, which will offset the negative impact on infrastructure and supply chains.
The bank’s chief economist, Beata Javorcik told reporters that the earthquake hit the area of Turkey that thrives mainly on agriculture and areas where there is light manufacturing, such that its spillovers to other sectors are limited.
The new report comes about ten days after Turkey and neighbouring Syria was hit by a devastating earthquake which has killed more than 41,000 people and left millions in need of humanitarian aid, with many survivors having been left homeless in near-freezing winter temperatures.
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Without considering the impact of the earthquake in its estimates, the bank’s growth projection for Turkey, the single biggest recipient of EBRD funds, has been revised down to 3% from 3.5% in 2023. The bank added that growing external financing requirements and political uncertainty associated with elections in 2023 create significant economic vulnerabilities.
Turkey’s plans for elections in June are being threatened by the earthquake that has thrown it into disarray, sparking frantic debate within President Tayyip Erdogan’s government and the opposition over a possible delay.
“As depreciation of the Turkish lira outpaced inflation since 2015, Turkey’s exports have been growing fast, benefiting from lower costs expressed in US dollars,” the report added.
Already, Turkey’s lira hit a fresh record low on Wednesday and it could not be ascertained when it would continue as the country continues to recover.
Story was adapted from Reuters.
