When we compare Turkey’s recently released economic package to that of other countries, it looks like we haven’t exactly aware of the fact that how critical the situation is. We are acting like we’re in the middle of a financial crisis.
The release of economic package was followed by decisions to regulate both work life and health. First the suspension bankruptcy processes, then regulation of working hours and administrative leaves, recommendation for banks operating hours and finally partial curfew for citizens older than 65 years old, they all make us think that government might take a few other steps soon.
According to insights I gathered from Ankara, the government is supposedly working on 70-article decisions set. The Sunday issue of the Official Gazette wasn’t being published for a while now. But this Sunday, it did. Well, it doesn’t take a fortune teller to guess that all official decisions will from now on be published in Official Gazette every day. But, we are making our decisions so slowly that it makes us look like we don’t really care about the critical state of the situation.
“How is this any different from a Financial Crisis?”
When we take a look at the markets, we can see that USD/TRY has been testing previous record highs recently, which is partially caused by the parity as well. The currency basket, on the other hand, stands somewhere quite near its previous peak level and this goes to show that parity movements along with demand for foreign currency lead to a rise in FX rates.
While oil prices could hit teens soon, there’s not much of a demand for gold neither. Investors almost seem like they’re running away from all assets. And the reason is:
There are some differences between a Financial & Economic Crisis and a financial crisis that arises out of a pandemic emergency. The government was able to intervene in the economy to help markets improve during the 1998, 2001 and 2008 financial crises but this time, the crisis is being caused by an epidemic disease. That is to say, we should not expect any improvement until we hear some good news about the pandemic. All support provided by government so far is in fact being offered to prevent real sector and markets from further deteriorating.
As it takes longer to bring the epidemic under control, I fear that despair might replace panic. Government may not offer new financial support. I know that all of these are negative scenarios but they must be taken into account nevertheless. When we look back further into history, we see that such pandemics always gave the governments the opportunity to “restore” the system, which means those in charge might be able to eliminate the deficiencies of the capitalist system. New approaches to work life might help give a full revision to the financial system or effective steps might be taken to help accelerate the digital transformation.
We may also expect a certain rise in health and pharmaceutical industries because these two sectors don’t need to go far away to maintain their supplies and continue their production. Their particular approach might help other companies operating in different industries change their supply and manufacturing policies. If the pandemic is brought under control sooner than expected, this need for restoration will be ignored.
In short, we need to hear some good news about the coronavirus pandemic first in order that the circumstances we live in can be further improved, not to mention that Chinese and U.S. stock markets must gather their strength back as soon as they can. Real Sector, on the other hand, will be able to pull itself together not before we hear positive news about the epidemic. Leading global investment firms predict U.S. economy will shrink 24% in Q2 alone.
So, we need to make our best efforts to make sure that Turkey’s year-end GDP does not fall below 2.5%
