Turkey’s policymakers have taken steps to support the economy as the impact of the coronavirus worsens.
There has been an easing in monetary and fiscal policy stances in Turkey, with the government and central bank seeking to reassure businesses and markets amid the escalating outbreak.
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On March 17th, the Turkish central bank reduced its key interest rate by 100 basis points to 9.75% and announced measures to support lending to businesses struggling with liquidity due to the virus outbreak.
As the virus outbreak worsens in the country with 192 cases reported and three deaths, the Turkish President Tayyip Erdogan has announced quarantine measures, including a lockdown. Flights into the country have been suspended with the government ordering the closure of cafes, bars and restaurants to slow down the spread of the virus.
The President also announced a $15.5 billion fiscal stimulus package amid worsening economic conditions in Turkey. The package will aim to support businesses struggling due to the virus outbreak and will include tax reliefs with VAT on domestic airlines cut from 18% to 1%. Tax payments for the hospitality, tourism and automotive sectors will be deferred for the next three months.
The construction sector is expected to suffer as a result of the outbreak, particularly if workers are not able to get on-site, projects are likely to be halted. However, as Turkey is a net importer of oil, the sharp falls in the price of oil and other commodities are expected to support growth in the sector. GlobalData forecasts that output in the construction industry will increase by 3.2% in 2020, following a deep contraction of 9.2% in 2019. The growth forecast is contingent on the virus outbreak being contained by mid-2020, however, a downward revision of the forecast is likely if the situation worsens in the coming months.
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