ISTANBUL — Turkey was already battling runaway inflation and relying on rich allies for funding to keep its economy afloat when a massive earthquake killed tens of thousands, razed entire cities and left millions needing urgent help.
Now, it must pour billions of dollars into rebuilding 11 southeastern provinces flattened by the February 6 tremor — the worst disaster of its post-Ottoman history.
That money will have to come on top of the billions of dollars in election promises that President Recep Tayyip Erdogan has made in the run-up to crucial polls still tentatively planned for May 14.
All this cash could turbo-charge consumer spending and industrial production — two key indicators of economic growth.
The problem for Erdogan, however, is that Turkey is very short on funds.
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The central bank’s vanishing coffers have been replenished by assistance from Russia and oil-rich Gulf states, which has helped Turkey spend tens of billions of dollars propping up the lira in the past few years.
But economists believe that money is only sufficient to keep Turkey’s finances in order — and the troubled lira from collapsing — until the May polls.
Turkish President Recep Tayyip Erdogan talks to the press as he visits the hard-hit southeastern Turkish city of Diyarbakir, five days after a 7.8 magnitude earthquake struck the border region of Turkey and Syria, on February 11, 2023. (Ilyas Akengin/AFP)
Now, Erdogan must repair some $84.1 billion in quake damage, according to an estimate from a prominent business group.
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Other experts’ estimates are more conservative, putting the total closer to $10 billion.
Reconstruction boost
With elections in mind, Erdogan has already promised to provide new homes to the millions affected within a year.
Should he find the cash, leaning heavily again on foreign donors, Erdogan will need to allocate much of it to the construction sector to rebuild parts of Turkey from the ground up.
Although contractors are now being blamed for following lax standards that allowed so many buildings to crumble, Erdogan relied on the sector to modernize much of the country with airports, roads and hospitals.
“The boost to output from reconstruction activities may largely offset the negative impact of the disruption to economic activity,” the European Bank for Reconstruction and Development (EBRD) said.
Turkish optician Cuneyt Eroglu, 45-year-old, reacts as he stands in front of his shop in Antakya on February 18, 2023. (Al-Doumy/AFP)
For the overall economy, at least, there are glimmers of hope.
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The area affected is one of Turkey’s least developed, contributing only nine percent to gross domestic product (GDP).
But Turkey’s agricultural production could take a hit.
Unay Tamgac, associate professor of economics at Ankara’s TOBB ETU University, said the region creates 14.3% of Turkey’s total agriculture, fishing and forestry output.
The region is a global exporter of food such as apricots, she added, warning there could be a knock-on effect on prices.
The UN’s Food and Agriculture Organisation has warned of disruptions to basic food production in Turkey and Syria.
Better than 1999?
The quake also damaged energy facilities, infrastructure, transportation, irrigation and logistics, added Tamgac.
Some look back to history for guidance.
Residents support a woman in front of a destroyed building in Duzce, the epicenter of the 12 November 1999 earthquake, measuring 7.2 on the open-ended Richter scale, that shook northwestern Turkey, killing at least 452 people and injuring another 2,300. (Manoocher Deghati/AFP)
Mahmoud Mohieldin, an executive director at the International Monetary Fund (IMF), said the 7.8-magnitude tremor could hurt the economy less than a 7.6-magnitude quake in 1999, which claimed more than 17,000 lives.
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An IMF spokesperson later said Mohieldin was speaking in a private capacity and not representing the fund’s official view.
The Turkish economy weakened by around 0.5 to 1.0% of GDP in 1999. But that tremor hit the country’s industrial heartland — including economic powerhouse Istanbul.
The economy quickly rebounded, however, growing by 1.5% of GDP in 2000 thanks to reconstruction efforts, the EBRD said.
Last week’s quake also “did not affect areas farther west favored by foreign tourists, who have become one of Turkey’s most important sources of foreign exchange,” Wolfango Piccoli, an analyst at Teneo consultancy, said in a note.
Headwinds
The focus, then, is where Erdogan will get the cash to spend on rebuilding.
“It’s clear there will be a need for foreign currency,” said Baki Demirel, associate professor of economy at Yalova University, since Turkey will now import more.
Turkey’s sovereign debt levels are relatively low, meaning the government has some leeway to issue long-term debt.
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On the downside, foreign investors have shunned Turkey because of Erdogan’s unorthodox economic views, which include an ill-fated attempt to fight inflation by slashing interest rates.
When the quake hit, Turkey’s annual inflation rate had slowed from a two-decade high of 85% last year to 58%.
With all the headwinds, economists agree the economy will stall in the coming year.
“Despite the uncertainty and different factors at play, such as global economic conditions and internal political expectations, the Turkish economy is likely to stagnate or grow below its natural rate,” economist Murat Kubilay wrote in a note online.
OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.
The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.
The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.
The personal and household goods subsector fell 2.5 per cent to $12.1 billion.
In volume terms, overall wholesale sales rose 0.5 per cent in July.
Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.
This report by The Canadian Press was first published Sept. 13, 2024.
VICTORIA – British Columbia is forecasting a record budget deficit and a rising debt of almost $129 billion less than two weeks before the start of a provincial election campaign where economic stability and future progress are expected to be major issues.
Finance Minister Katrine Conroy, who has announced her retirement and will not seek re-election in the Oct. 19 vote, said Tuesday her final budget update as minister predicts a deficit of $8.9 billion, up $1.1 billion from a forecast she made earlier this year.
Conroy said she acknowledges “challenges” facing B.C., including three consecutive deficit budgets, but expected improved economic growth where the province will start to “turn a corner.”
The $8.9 billion deficit forecast for 2024-2025 is followed by annual deficit projections of $6.7 billion and $6.1 billion in 2026-2027, Conroy said at a news conference outlining the government’s first quarterly financial update.
Conroy said lower corporate income tax and natural resource revenues and the increased cost of fighting wildfires have had some of the largest impacts on the budget.
“I want to acknowledge the economic uncertainties,” she said. “While global inflation is showing signs of easing and we’ve seen cuts to the Bank of Canada interest rates, we know that the challenges are not over.”
Conroy said wildfire response costs are expected to total $886 million this year, more than $650 million higher than originally forecast.
Corporate income tax revenue is forecast to be $638 million lower as a result of federal government updates and natural resource revenues are down $299 million due to lower prices for natural gas, lumber and electricity, she said.
Debt-servicing costs are also forecast to be $344 million higher due to the larger debt balance, the current interest rate and accelerated borrowing to ensure services and capital projects are maintained through the province’s election period, said Conroy.
B.C.’s economic growth is expected to strengthen over the next three years, but the timing of a return to a balanced budget will fall to another minister, said Conroy, who was addressing what likely would be her last news conference as Minister of Finance.
The election is expected to be called on Sept. 21, with the vote set for Oct. 19.
“While we are a strong province, people are facing challenges,” she said. “We have never shied away from taking those challenges head on, because we want to keep British Columbians secure and help them build good lives now and for the long term. With the investments we’re making and the actions we’re taking to support people and build a stronger economy, we’ve started to turn a corner.”
Premier David Eby said before the fiscal forecast was released Tuesday that the New Democrat government remains committed to providing services and supports for people in British Columbia and cuts are not on his agenda.
Eby said people have been hurt by high interest costs and the province is facing budget pressures connected to low resource prices, high wildfire costs and struggling global economies.
The premier said that now is not the time to reduce supports and services for people.
Last month’s year-end report for the 2023-2024 budget saw the province post a budget deficit of $5.035 billion, down from the previous forecast of $5.9 billion.
Eby said he expects government financial priorities to become a major issue during the upcoming election, with the NDP pledging to continue to fund services and the B.C. Conservatives looking to make cuts.
This report by The Canadian Press was first published Sept. 10, 2024.
Note to readers: This is a corrected story. A previous version said the debt would be going up to more than $129 billion. In fact, it will be almost $129 billion.
NANAIMO, B.C. – Former Bank of Canada governor Mark Carney says he’ll be advising the Liberal party to flip some the challenges posed by an increasingly divided and dangerous world into an economic opportunity for Canada.
But he won’t say what his specific advice will be on economic issues that are politically divisive in Canada, like the carbon tax.
He presented his vision for the Liberals’ economic policy at the party’s caucus retreat in Nanaimo, B.C. today, after he agreed to help the party prepare for the next election as chair of a Liberal task force on economic growth.
Carney has been touted as a possible leadership contender to replace Justin Trudeau, who has said he has tried to coax Carney into politics for years.
Carney says if the prime minister asks him to do something he will do it to the best of his ability, but won’t elaborate on whether the new adviser role could lead to him adding his name to a ballot in the next election.
Finance Minister Chrystia Freeland says she has been taking advice from Carney for years, and that his new position won’t infringe on her role.
This report by The Canadian Press was first published Sept. 10, 2024.
