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Turkish study suggests full lockdown would limit economic damage

The research paper, which assumes a minimum economic stimulus plan, was authored by Selva Demiralp, Cem Cakmakli, Sevcan Yesiltas and Muhammed Ali Yildirim from Koc and Sebnem Kalemli-Ozcan from Maryland.

Turkish study suggests full lockdown would limit economic damage

Turkey could sharply limit damage to its economy if it were to impose a nationwide stay-at-home order to curb the spread of the coronavirus, and faces a contraction of up to 17% if it maintains its current course, research showed on Thursday.

Ankara has shied away from imposing a full stay-at-home order in an effort to shield the economy, though those aged 65 and above and most people under 20 are under lockdown. It has also shuttered many businesses, closed borders, halted much intercity travel and adopted weekend lockdowns.

However, the preliminary findings by five Turkish economists suggest an immediate “full lockdown” would better insulate the economy and lead to a drop in economic output this year of about 7.8%, by concentrating and shortening the period of pain.

“When the full lockdown is delayed, it becomes harder to contain the pandemic, and thus the duration of the lockdown and hence the economic costs increase,” said the economists from Koc University in Istanbul and the University of Maryland.

Turkey’s economy is facing a second recession in less than two years due to the COVID-19 disease pandemic, after having emerged from the first one in the second half of 2019.

Two government officials told Reuters the trajectory of the outbreak would ultimately determine how the economy fares, but they painted a far rosier picture than the study, in part due to their expectations of a rebound in domestic demand towards year-end.

One said in a worst-case scenario the economy would contract by 2-3% this year, and in a best-case it would grow by 3%. The other official said a full lockdown was the last option on the agenda.

Turkey has so far reported nearly 70,000 confirmed coronavirus cases, the ninth highest figure in the world, with more than 1,500 deaths.

CHINA-STYLE LOCKDOWN

In the best case scenario, the researchers said, Turkey would immediately adopt a China-style lockdown in which people only leave homes for essential jobs and needs, a measure they said would contain the outbreak in 38 days.

A one-day delay in imposing a lockdown would extend that to 44 days, and gross domestic product (GDP) would contract by 8.2% instead of the best-case 7.8%, the findings showed. It will take about 200 days to contain the outbreak under the measures currently in place, it said, assuming a far longer battle with the virus than most other economists.

The International Institute of Finance predicts Turkey’s economy will shrink by 2.7% this year. Moody’s ratings agency expects a cumulative GDP contraction of 7% in the second and third quarters before a rebound.

Worldwide most countries – both those that adopted stringent lockdowns and those that implemented less onerous measures – are expected to go into recession as a result of the coronavirus pandemic, though some will bounce back faster than others.

President Tayyip Erdogan’s government has extended fiscal support to some workers, eased taxes and extended liquidity to the financial sector. The main opposition party has called for a full stay-at-home order.

Istanbul Mayor Ekrem Imamoglu said on Tuesday people were not heeding the government’s voluntary stay-home advice, and added there was a 12-13% jump in public transport use on Monday after a weekend lockdown, compared to Friday.

The research paper, which assumes a minimum economic stimulus plan, was authored by Selva Demiralp, Cem Cakmakli, Sevcan Yesiltas and Muhammed Ali Yildirim from Koc and Sebnem Kalemli-Ozcan from Maryland.

The Thomson Reuters

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