Yesterday on my YouTube channel, I shared a video on details of this package and tis possible impacts. Here’s a quick summary of my video:
The aim of this package is not to achieve 5% GDP growth indicated in NEP goals. The tone of voice President Erdoğan used during his press conference has showed us that this will be a long and hard process. So, I must say that this package is only released to prevent GDP from falling below 2.5%.
Although I thought the package has some exciting aspects to it, markets didn’t seem to agree with me, because monetary and capital markets thought that the government would shower them with money like US President did. But, as I always say, the government has only a limited power. For now, we have a 100-billion TRY package. By the way, I need to mention that Polish government offers an economic package of 52 billion euros. Obviously, Poland, who never stops competing with us, wants to turn this threat into an opportunity.
Public banks have some great responsibilities to fulfil here: I think it won’t be very surprising that private banks won’t be as eager as public banks in terms of flexibility despite the Banks Association of Turkey’s recommendation on this matter. However, Central Bank’s measures would definitely push banks to offer fresh loans.
The package addresses to the following four issues:
- Export
- Domestic Trade and Tourism
- Employment
- Families and Retirees
Since the beginning of the week, CBRT has been making great efforts to come up with a solution to improve exports. Eventually, the package gives priority to boosting exports. In my previous articles I had told you that the government needed to make positive discrimination. And I’m happy it is doing it.
The package comprises particular measures including delaying tax collection in areas where domestic trade and tourism are directly affected by coronavirus; flexibility in debt payment, and efforts to offer additional funding. These measures would definitely help service sector breathe a sigh of relief. VAT reduction in domestic flight fares was a wise effort as well. It’s been a reasonable support for domestic tourism as it is expected to enliven due to travel ban.
“Government must help people stay calm…”
Apparently, a series of new measures such as flexible working hours, telecommuting, etc. will be implemented to prevent companies from making employee cutbacks. Government will make efforts to facilitate loans for businesses just like it makes efforts to protect people from losing their jobs. Companies that do not opt for employee cutbacks will be given priority in loan offering. I have told you before about companies’ wrong employee policies in terms of when to let anyone go. I’m happy to see that government is actually doing something to correct this mistake.
Turkey ranks at the bottom among other OECD countries in terms of the ratio of financial assistance for needy families to GDP. The fact that the package has revealed more financial assistance to families hopefully helps Turkey take steps toward becoming a welfare state. If households’ purchasing power continue to decrease, it will be almost impossible to keep the economy alive. I believe that social welfare-oriented loan packages, investments intended at boosting welfare and new regulations to pensions will help Turkey correct its deficiencies in this matter.
I’m sure elderly population in Turkey must feel relieved now especially after hearing government’s statement that they will not be treated as the old population of Great Britain.
Two articles have been removed from the previous statement: One that was designed for those who declare income tax return. This article might give the impression that the government was favouring the rich.
The second article that was removed was “We envisage considering new alternatives in supply chain”. Maybe to avoid antagonizing Russia again… Thus, two articles which might cause political and diplomatic conflicts were eliminated for good.
However, government should release other packages as well. In addition to immediate tax cuts, Turkish Government should give the same declaration as Canadian Government: “Focus on taking good care of your health – and leave the rest to us”
