The future is uncertain and we definitely cannot shy away from its inevitability. The change this pandemic is bringing in the world is far from what anyone could have ever anticipated. It has created havoc in the lives of people worldwide and has left us to grapple with the challenges. The aura of despondency created by this crisis is impacting every aspect of life; be it physical, social, psychological, or financial. Economic Impact across the world The economic meltdown has been a by-product of this pandemic and no wonder WTO (World Trade Organization) estimates global trade fell 9.2% in 2020. The interconnection and inter-dependencies of world trade make this virus economically contagious too. There are restrictions and lockdowns put by the governments to curb the further spread of the virus and thereby affecting the consumers getting to stores or travel, eventually depleting the demand from the market. But in such scenarios, the psychological aspect also comes into play where consumers are scared and investors wait-and-see and tend to delay their purchases or investments. Major shocks across the world resulting in the derailment of international trade:
- Supply-side shock: Factory closures, drop in employment, global supply chain disruptions, retrenchment in service sector industries
- Demand-side shock: Decline in transportation, tourism, restaurants, recreational activities, education services, etc.
This pandemic has posed daunting challenges to the survival of domestic or international trade. It has led to a dramatic decline in FDI flows, reduction in global production and employment and overall contraction of economies. While no country is spared from its negative impact, Turkey has still performed well in such circumstances. Let’s take a look in detail: Impact of the pandemic on Turkey Turkey, like any other country, has been affected by COVID 19 through regular channels of supply and demand shocks. There was a significant percentage of growth rate decline in the first and second quarter of 2020, but the combination of expansionary fiscal and monetary policies yielded 6.7% of growth in the third quarter of 2020. On the other hand, cheap lending expedited a record drop in LIRA, brought down the country’s foreign currency reserves, and pushed inflation to 15%. One more important aspect to consider here is the increased trade deficit in turkey during pandemic hit 2020. It already stood at around $30 billion in 2019, which further widened in 2020 due to increased imports and fall in the exports. Despite all this, Turkey is amongst one of those few countries globally that could avoid the contraction in the economy due to the Coronavirus pandemic and its growth rate was 1.8% as a whole in 2020. Turkey’s supply chain is not dependent on China and the Turkish Exporters’ Assembly revealed that Turkish products were exported to some 206 countries in November 2020 suggesting recovery continuing successfully. As per the Reuters polls of economists, turkey is expected to grow its GDP by more than 5% mostly supported by 16-20% growth in exports after the 2020 crisis. Positive Trends and growth prospects of Turkey in 2021
Downturns and crisis somehow offer a prospect of outplaying the opponents or competitors. In fierce competition with China, Turkey could maintain annual medical exports of $5 billion in 2020 fueled by the mistrust among countries for China. Turkey has been pretty proactive in exploiting the opportunity in such a dire situation. Turkey’s economy is expected to grow at 4.8% in 2021, bouncing back from the collapse brought by the pandemic, as per a Reuters poll. Turkish Exporters Assembly Chairman Ismail Gülle emphasized that pandemic has changed the shape of trade transactions and they need to invest and focus more on research and development. COVID crisis has created a temporary reduction in production capacities worldwide; with the local production costs being low in Turkey and broad manufacturing sector, it can be identified as the new production or logistics facility by the world. The weak Turkish LIRA also makes the exports comparatively cheaper. Turkey still has high untapped potential in international trade and that can be significantly brought out by further digital transformation. This pandemic has strengthened the need for companies to be more creative with their business models while integrating themselves with digitalization. The government has particularly stressed upon the fact that they would be focusing on and supporting digital marketing activities to boost e-exports. In a recent Turkish-Sweden Joint Economic and Trade Committee (JETCO) meeting held online, both countries discussed long-term trade relations and ways to boost their bilateral trade volumes $5 billionin a balanced way. The finance minister also mentioned that the production and overall trade has come to a better position even in comparison to the pre-pandemic times. The Turkish finance minister stated that half of the economic growth of Turkey in 2021 will come from foreign trade. He also told in February 2021, that there has been trade deficit shrinkage in the new year with a rise in exports and decline in imports, showing an overall positive sign amid pandemic. This definitely brought euphoria among traders in Turkey as news hit headlines of exports reaching new heights in April 2021 and outpacing the pre-pandemic levels. Turkey’s customs union agreement with the EU coupled with its strategic location and capable human infrastructure offers a great advantage in attracting investors globally. Also, the government’s attention and efforts to boost the exports of country shows the opportunities it offers for the small and medium-sized enterprises in Turkey to turn into a successful exporter. The recurring wave of COVID is leaving the world bewildered and keeping nations on their toes to handle the human suffering and unprecedented economic shock. A strong economy can always help in dealing with such circumstances in a better way. All these trends are suggestive of the fact that recovery in Turkey from pandemic hit 2020 is on track and strategic steps can defer or completely avoid any further damage. It also motivates the small enterprises to think big and enter into the international trade through digital medium amid Pandemic. For showcasing your products and finding buyers globally, register yourself with Koytola and we are there to help you at every step to achieve your goal.