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Amid this tragedy, attention has shifted to the post-quake economic losses that are predicted for Turkiye and Syria in the medium and short term.
This article was translated from Arabic.
Following the deadly earthquake that left vast swathes of Turkiye and Syria in ruins, efforts to remove the rubble are still ongoing, and the two nations are reporting a staggering death toll that is increasing daily. However, amid this tragedy, attention has shifted to the economic losses that are predicted for both countries in the medium and short term.
These losses must be taken into account while determining the need for international economic assistance and developing government plans to rehabilitate the afflicted areas, particularly as they are anticipated to suffer in the long run, impacting the quality of life of affected citizens in both countries.
Additionally, these losses will not only have an effect on the earthquake-affected regions but also on all facets of the Syrian and Turkish economies. The two countries’ general economic policies must therefore take these effects into account and adapt accordingly.
Impact of earthquake on overall performance of the Turkish economy
The earthquake has caused widespread devastation throughout ten of the largest Turkish cities, which collectively account for approximately 10 per cent of Turkiye’s GDP. These cities have been instrumental in driving economic growth in Turkiye, contributing 1.15 points to the country’s overall growth.
Notably, the city of Gaziantep alone has contributed 0.25 points to this growth, and is considered the country’s most important industrial center. However, Gaziantep has been severely affected by the earthquake, along with other cities, and the return to normal life in these areas is critical to safeguarding a significant portion of the Turkish economy.
The severity of the situation is highlighted by the data from the Energy Exchange in Istanbul, which shows an 11 per cent decrease in electricity consumption throughout the country following the earthquake. This is a clear indication of the extent of the damage to consumption and industrial activity, and suggests that a significant proportion of Turkiye’s GDP and economic growth will be under threat until the affected cities are able to recover.
The destruction of the industrial areas in the southeast will have a particularly significant impact on industrial exports, given that these areas contribute to the production of over 8.5 per cent of Turkiye’s annual exported goods.
This aspect of the crisis will contribute to a reduction in the amount of hard currency flowing into the country from exports, putting pressure on the value of the Turkish lira in the coming months. Turkiye is already suffering from a chronic monetary crisis, with the local currency having lost 29 percent of its value in the past year, and 44 per cent of its value in 2021.
In total, the earthquake is expected to cost the Turkish economy around $84 billion, including around $70.8 billion worth of losses from the destruction of buildings and facilities. The losses, which also include $10.4 billion in damage to the domestic product and productivity of economic sectors, represent around 10.2 per cent of Turkiye’s GDP, highlighting the extent of the damage relative to the size of the country’s economy, as estimated by the World Bank.
As a result, the Turkish public budget is expected to suffer for years to come. The government will have to spend more to compensate those affected and rebuild infrastructure. Meanwhile, public revenues are projected to decline due to the decrease in economic activity in the affected regions.
This decline in government spending will also impact low-income Turkish citizens who benefit from social protection networks. With a considerable increase in the deficit that reached record levels last year, the Turkish public budget is already experiencing difficulties.
The Turkish government predicts that the public budget deficit will rise to around 5.4 per cent of GDP, primarily because of the earthquake. This figure exceeds the official prediction made prior to the disaster, which did not anticipate the deficit rate to reach 3.5% of GDP. As a result, the Turkish government will have to increase its public debt to deal with this deficit, which will increase the burden of debt interest on the state.
Economic losses in the affected Turkish areas
The districts directly hit by the earthquake will see will naturally suffer at a greater rate. The Federation of Companies and Businesses in Turkiye predicts that the impacted regions will incur labor force losses totaling $10.4 billion, which reflects the revenue lost as a result of worker and employee fatalities or injuries. A comparable amount of aid or compensation will be required on a humanitarian level in order to compensate for the affected families’ lost wages.
The most pressing issue for the affected areas, however, is the number of people left homeless, who will have to wait for reconstruction efforts to begin. The minister of environment and urban development reports that the number of collapsed buildings has surpassed 12,141, and Turkish construction businesses expect this number to rise as a result of persistent aftershocks.
Official estimates state that the earthquake has also uncovered more than 600 non-compliant buildings. Although not all of these buildings collapsed, the earthquake damage exposed major defects that require their evacuation pending repairs.
Infrastructural damage in the impacted areas is anticipated to cause a loss of revenue from agricultural and tourism activities, which will hinder these economic sectors in the long run. The number of people living in poverty will rise in the earthquake-affected rural and agricultural villages that formerly produced 14 per cent of Turkiye’s agricultural output.
Economic losses in Syria
Considering the fact that the bulk of the damaged districts is under the control of the opposition, the economic harm caused by the earthquake in Syria is difficult to quantify.
Accurate statistics cannot be provided due to the weakness of the Syrian government’s institutions and the inadequateness of the available follow-up methods. It is difficult to assess how much the earthquake contributed to GDP or economic growth since it struck regions where the Syrian war had already generated economic chaos.
According to reports, 12,122 structures were completely or partially destroyed by the earthquake, making it much more difficult for the Syrian government or opposition forces to start the reconstruction process. These cities have already been devastated by the Syrian conflict, and neither party capable of launching reconstruction efforts or providing compensation for the damage caused.
In addition to the already considerable economic issues brought on by the Syrian crisis, the earthquake’s damage led 5.37 million people to flee their homes, adding to the already significant number of people who have been uprooted and displaced. In the governorates of Idlib, Aleppo, Latakia, and Hama, new displacement waves have affected entire cities and villages, necessitating emergency aid to provide relief for refugees.
Turkiye is more financially capable than Syria, indicating that it will most likely be able to reconstruct the destroyed buildings and infrastructure more successfully. The division of authority over the damaged areas between the regime and the opposition makes it more difficult for Syria to create a coherent plan to address the damage in all regions.
The Syrian regime’s tense international relations and the inability of traditional allies – Iran and Russia – to provide balanced financial support, coupled with the imposition of sanctions, only compound the difficulties Syria will face in the aftermath of the earthquake.