The COVID-19 pandemic is disrupting the world economy on an unprecedented scale with analysts projecting little or no global growth in 2020. Meanwhile, developed economies in the West face staggering contractions of up to one third of GDP in Q2 and a spike in unemployment. US unemployment alone is estimated to have jumped to over 10% in March from a 50-year low of 3.5% month earlier. Emerging markets, with less capacity to defend their economies, may be hit even harder. Countries around the world have taken extraordinary fiscal and monetary measures to manage the crisis and set the stage for recovery.
Turkey was the world’s last major economy to contract COVID-19 and has taken an early and proactive approach to limit infection and transmission and “flatten the curve”. Turkey has unveiled a host of responses to help dampen the economic effects of the virus including cutting interest rates, ensuring liquidity and earmarking 100 billion lira in relief for those affected by the virus. Through our webinar, policymakers, experts and private sector representatives will discuss the existing and potential economic measures Turkey took and can take in light of the measures taken by other countries.
On April 9, 2020, the Atlantic Council IN TURKEY organized a virtual event to discuss Global economic developments and how to make economies resilient to COVID-19 and the Turkish response.
The event featured a distinguished panel composed of Hakan Akbaş, Senior Advisor, Albright Stonebridge Group; Timothy Ash, Senior Emerging Market Sovereign Strategist, BlueBay Asset Management; Josh Lipsky, Director, Programs and Policy, Global Business and Economics Program, Atlantic Council and Hakan Yurdakul, Economic Policies Council Member, Presidency of the Republic of Turkey and was moderated by Atlantic Council IN TURKEY Director Defne Sadıklar Arslan.
The COVID-19 pandemic is disrupting the world economy on an unprecedented scale. As Josh Lipsky remarked, it is as if the “global economy went from full speed to full stop and no one [had] their seat belts on”. The shocking economic numbers and projections, including a contraction of up to one third of GDP and unemployment spiking nearly three-fold, have countries all across the world responding with extraordinary fiscal and monetary measures to manage the crisis.
All panelists agreed it would be beneficial for countries around the world to coordinate or synchronize their recovery efforts as this would help reassure markets, ensuring greater liquidity. One topic of conversation that emerged in the discussion was over the role multinational financial organizations, such as the IMF, can play in the economic challenge. The IMF has taken steps to boost their lending capacity, however, with already over half of member countries requesting support, the IMF will need more funds or else be unable to sustain all requests in the long term.
Hakan Akbaş pointed out that in a global crisis such as that we are facing, the world expects a global leader, in this the United States, to step up and lead. According to Akbaş however, what we have seen so far is a reluctance or lack of readiness on the part of the US to assume that responsibility. Josh pointed out that the United States has a difficult job of managing not just its own economy but the global economy, and characterized the monetary and fiscal steps the US has taken so far good but not nearly enough.
The panel agreed that while COVID-19 has generally so far hit developed economies, such as Europe and the United States, the hardest, it is even more threatening to emerging economies. Timothy Ash noted that emerging economies, with poor populations, worse health care systems, and, in general, higher debt-to-GDP ratios, are less able to cope with crises. Emerging markets that rely on oil and natural gas exports also face a compounded problem of a sharp drop in demand which has sent prices crashing.
Turkey, which as Timothy Ash pointed out, is in a relatively favorable fiscal position compared to most emerging markets, was the world’s last major economy to contract the virus. However, since then, the number of cases have grown rapidly in the past weeks and the country now has the seventh highest amount of cases according to the WHO.
Hakan Yurdakul reminded the audience that the crisis is first and foremost a health crisis and that the economic challenges are secondary. According to Yurdakul, 93% of Turkey’s population is covered by the health care system, providing almost free of charge care. Yurdakul remarked that on the economic side, the main challenge is the uncertainty of how long the crisis will last, which complicates policymaking. Turkey unveiled a package of fiscal policy measures worth 100 billion lira on March 18 to relieve struggling businesses including a six-month deferral on many taxes and three-moth deferral on loans to state banks and doubling the limit of the credit guarantee fund. Turkey has also pledged support for industries hit hardest, including airlines and tourism while the Central Bank of Turkey has taken measures to ensure the liquidity of banks. However, should the crisis persist longer than expected, more measures may be taken said Yurdakul, as the current measures are aimed at the three to six month period.
Event recap by Atlantic Council IN TURKEY Program Assistant Grady Wilson
A conversation with
Albright Stonebridge Group
Senior Emerging Market Sovereign Strategist
BlueBay Asset Management
Director, Programs and Policy, Global Business and Economics Program
Economic Policies Council Member
Presidency of the Republic of Turkey
Welcome and moderation by:
Defne Sadıklar Arslan
Director, Atlantic Council IN TURKEY