Massive earthquake cost to deepen Turkey’s economic woes
The disaster response requires a significant increase in public spending to meet the needs of 13.5 million affected people and rebuild massive destruction, threatening to widen Ankara’s budget deficit.
With its economy already fragile, Turkey now braces for a widening budget deficit, fresh inflationary pressures and a blow to its gross domestic product (GDP) after a pair of massive earthquakes devastated vast areas in the country’s southeast.
The disaster struck in the lead-up to the May 14 elections, turning up the pressure on President Recep Tayyip Erdogan, who faces the toughest yet re-election race in his two-decade rule. With annual inflation running at nearly 58%, Erdogan had hoped to deliver some economic relief to an electorate exasperated by skyrocketing prices before the crucial polls.
The disaster response now requires a significant increase in public spending to meet the needs of 13.5 million affected people — 15.7% of Turkey’s population — and rebuild massive destruction across 10 provinces. As a result, the government’s budget deficit, projected at 3.5% of the GDP in 2023, is likely to grow to up to 5% of the GDP, threatening to exacerbate Turkey’s current account deficit and other economic fragilities.
Touring quake-hit areas since Wednesday, Erdogan announced financial aid of 10,000 Turkish liras ($531) for each affected family and pledged that the government will build new homes for the victims within a year and pay the rents of those unwilling to stay in tents.
