(Bloomberg) — Turkey’s economy contracted the most in over a decade but fared better than forecast by analysts as the government contained the damage from the coronavirus pandemic with a campaign of stimulus.
Gross domestic product last quarter shrank 9.9% from a year earlier, after a gain of 4.5% in the previous three months, according to data released on Monday. The median of 17 forecasts in a Bloomberg survey was for a contraction of 10.7%.
The severity of the shock was more evident in seasonally and working day-adjusted figures, which showed a decline of 11% in the second quarter from the previous three months, making it the steepest contraction in data going back to 1998.
Still, the $743 billion economy performed better than many of its peers among developing nations, thanks in part to a combination of interest-rate cuts, fiscal spending and a government-sponsored credit push.
Restrictions imposed by Turkey to stop the contagion from March were more stringent than in the rest of central and eastern Europe, the Middle East and North Africa, which translated into a “pronounced downturn” in the second quarter, according to a Goldman Sachs Group Inc.
To help businesses and consumers ride out the the pandemic, the Turkish government unveiled a 240 billion-lira ($32.7 billion) stimulus package while state banks ramped up lending. Meantime, the central bank injected liquidity by scooping up government bonds and delivered a series of rate cuts including an emergency decrease of a full percentage point in March.
An economic turnaround started to take hold as lockdown measures began to ease toward the end of the second quarter. Industrial production grew in June for the first time since February and economic confidence improved for four straight months through August.
But the drawbacks of the government’s efforts to juice up the economy have also become more obvious.
Inflationary pressures have reemerged alongside another wave of lira depreciation, prompting the central bank to increase the cost of funding through stealth tightening but without resorting to an outright rate hike. Turkey’s currency has depreciated about 19% against the dollar this year and is the worst performer in emerging markets in the third quarter.
The stimulus campaign may not save the economy from one of the steepest full-year contractions in history, with the International Monetary Fund predicting it could slump 5%. Treasury and Finance Minister Berat Albayrak is more optimistic, estimating this year’s performance at between minus 2% to a 1% gain.
“Leading indicators confirm that the economy is in the phase of recovery from its bottom point,” said Enver Erkan, an economist at Tera Securities in Istanbul.
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31.4% spring slide for a US economy likely to shrink in 2020 – Yahoo Canada Finance
WASHINGTON — The U.S. economy plunged at an unprecedented rate this spring and even with a record rebound expected in the just-ended third quarter, the U.S. economy will likely shrink this year, the first time that has happened since the Great Recession.
The gross domestic product, the economy’s total output of goods and services, fell at a rate of 31.4% in the April-June quarter, only slightly changed from the 31.7% drop estimated one month ago, the Commerce Department reported Wednesday.
The government’s last look at the second quarter showed a decline that was more than three times larger than the fall of 10% in the first quarter of 1958 when Dwight Eisenhower was president, which had been the largest decline in U.S. history.
Economists believe the economy will expand at an annual rate of 30% in the current quarter as businesses have re-opened and millions of people have gone back to work. That would shatter the old record for a quarterly GDP increase, a 16.7% surge in the first quarter of 1950 when Harry Truman was president.
The government will not release its July-September GDP report until Oct. 29, just five days before the presidential election.
While President Donald Trump is counting on an economic rebound to convince voters to give him a second term, economists said any such bounce back this year is a longshot.
Economists are forecasting that growth will slow significantly in the final three months of this year to a rate of around 4% and the U.S. could actually topple back into a recession if Congress fails to pass another stimulus measure or if there is a resurgence of COVID-19. There are upticks in infections occurring right now in some regions of the country, including New York.
“There are a lot of potential pitfalls out there,” said Gus Faucher, chief economist at PNC Financial Services. “We are still dealing with a number of significant reductions because of the pandemic.”
In 2020, economists expect GDP to fall by around 4% , which would mark the first annual decline in GDP since a drop of 2.5% in 2009 during the recession triggered by the 2008 financial crisis.
“With economic momentum cooling, fiscal stimulus expiring, flu season approaching and election uncertainty rising, the main question is how strong the labour market will be going into the fourth quarter,” said Gregory Daco, chief U.S. economist at Oxford Economics.
“With the prospect of additinal fiscal aid dwindling, consumers, businesses and local governments will have to fend for themselves in the coming months,” Daco said.
The Trump administration is forecasting solid growth in coming quarters that will restore all of the output lost to the pandemic. Yet most economists believe it could take some time for all the lost output to be restored and they don’t rule out a return to shrinking GDP if no further government support is forthcoming.
So far this year, the economy fell at a 5% rate in the first quarter, signalling an end to a nearly 11-year-long economic expansion, the longest in U.S. history. That drop was followed by the second quarter decline of 31.4%, which was initially estimated two months ago as a drop of 32.9%, and then revised to a decline of 31.7% last month.
The slight upward revision in this report reflected less of a plunge in consumer spending than had been estimated. It was still a record fall at a rate of 33.2%, but last month projections were for a decline of 34.1%. This improvement was offset somewhat by downward revisions to exports and to business investment.
Martin Crutsinger, The Associated Press
Covid-19 Relief for Undocumented Would Boost the Economy for All – BNN
(Bloomberg Opinion) — Among the many policy failures of our national Covid-19 response, the exclusion of 18.1 million people, including 4.9 million U.S. citizens, from federal stimulus packages will go down as one of the most economically devastating self-inflicted wounds.
These are neighbors who shop at local stores, pay rent and fuel the economy through their workforce participation to the tune of a $1.6 trillion contribution to the nation’s gross domestic product. According to research conducted by the University of California, Los Angeles, leaving undocumented immigrants out of the $1,200 tax rebate approved by Congress in March resulted in a $10 billion loss in economic activity — which is almost $3.4 billion more than what it would have cost to include them. (One of us, Raul Hinojosa-Ojeda, is a co-author of the study.)
The important role that documented and undocumented immigrants play in the national economy has been shown repeatedly in studies by the National Immigration Forum, the Center on Budget and Policy Priorities, the Brookings Institution and others.
With Congress negotiating a new coronavirus stimulus package, relief for undocumented workers must be a priority.
In California, undocumented immigrants make up more than 9% of the workforce and fuel the world’s fifth-largest economy. It is both a moral and an economic imperative to be sure they survive the pandemic. In April, Governor Gavin Newsom announced an emergency $125 million financial assistance program that would extend benefits to undocumented Californians. Cities including Los Angeles and San Francisco also have public and private programs to provide a safety net for immigrants who otherwise have nowhere to turn. But without an infusion of federal support, many undocumented families will fall off a financial cliff and take their local economies with them.
There are many communities outside of California that have not stepped in to fill the federal void even when undocumented immigrants and their families are hurting. The national unemployment rate for undocumented workers reached 29% in May, much higher than the rate for any other demographic group. The overconcentration of undocumented residents in construction and service jobs that have seen drastic cuts amid Covid-19 has resulted in a 25% reduction in wages for those workers.
The UCLA report found that undocumented workers and families are key contributors to the U.S. economy: About 78% of undocumented workers are employed in essential sectors. Undocumented workers and their families earn lower wages compared with their U.S.-born counterparts. Even before Covid-19, immigrant families struggled to make ends meet, yet their contributions keep local economies running. The failure to address their needs will only deepen the pandemic’s economic recession.
The shortsightedness of the federal policy also hurts U.S. citizens of all races and backgrounds. The UCLA report found undocumented immigrants contribute more than $190 billion in taxes. The American-born children of undocumented immigrants are facing hunger, potential homelessness and financial stress. The Donald Trump administration even made a decision to deny the $1,200 stimulus check to families in which one parent was undocumented, even if the other was a U.S. citizen.
The pandemic has exposed not only health and social inequalities, but also how our local and federal responses can lead to greater economic decline and deeper racial inequality. This vicious cycle of systemic discriminatory policies can be reversed with new policy ideas in a future federal stimulus package. Despite facing high unemployment rates, undocumented workers and their families are critical to meeting consumer demand for the national, state and local economic recovery.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Lorena Gonzalez is an assembly member in the California Legislature for the 80th District.
Raul Hinojosa-Ojeda is a professor with the UCLA César E. Chávez Department of Chicana/o and Central American Studies and the UCLA Latino Policy and Politics Initiative.
©2020 Bloomberg L.P.
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