Earthquake hits Turkey at critical time for country’s future
Civilians search for survivors under the rubble of collapsed buildings in Kahramanmaras, near the epicenter of the earthquake, a day after a 7.8 magnitude quake hit the country’s southeast, February 7, 2023.
Adem Altan | AFP | Getty Images
The lives of millions of people in Turkey and Syria were forever changed on Monday when two consecutive earthquakes sent shock waves hundreds of miles away.
With an interval of nine hours and a magnitude of 7.8 in Turkey and 7.5 in Syria on the Richter scale, the earthquakes were the strongest in the region in almost a century.
At the time of writing, the death toll from the earthquakes has exceeded 12,000, many of whom are still missing and seriously injured. The World Health Organization has estimated the number of people affected by the disaster at 23 million. At least 6,000 buildings collapsed, many of them left with residents. Rescue efforts are still the top priority, with some 25,000 deployed in Turkey and thousands more dispatched from overseas, but a brutal winter storm is now threatening the lives of survivors and those still under the rubble.
Syria, ravaged by 12 years of war and terrorism, is the least prepared for such a crisis. Its infrastructure is severely depleted and the country remains under Western sanctions. Thousands of those in the affected areas are already refugees or internally displaced persons.
While the dust from the catastrophe is still settling, regional analysts are focusing on the long-term effect the catastrophe could have on Turkey, a country whose population of 85 million is already mired in economic trouble — and whose military, economy, and politics have a big impact far beyond.
A decisive year for Turkey
This year will be a critical inflection point for Turkey as it approaches the May 14 presidential election. The outcome of these elections – whether current President Recep Tayyip Erdogan remains in power or not – will have huge implications for Turkey’s population, economy and currency. , and democracy.
Erdogan’s response to the disaster and potential calls for accountability for why so many buildings were not designed to withstand such aftershocks will now play a major role in his political future.
“If rescue work is done wrong and people get frustrated, there’s a backlash,” Mike Harris, founder of Cribstone Strategic Macro, told CNBC Tuesday. “And another question, of course, is the buildings and which ones were destroyed. To the extent that they were built according to new codes and the authorities did not enforce the rules, Erdogan could take a serious hit. Thus, Erdogan lost control. narration.”
Erdogan called for early elections in May amid a national cost-of-living crisis, with local inflation topping 57% – up from over 80% between August and November. Some analysts say the move is indicative of Erdogan’s eagerness to keep another term in office before his controversial economic policies backfire.
Harris described how the president has created “this weird situation where inflation is 80% but he needs to keep the currency stable until the election.”
Through a very unorthodox policy, Erdogan “found a very creative and very costly way to essentially de-dollarize the economy,” he said, citing examples such as allowing the Turks to keep their bank deposits at a rate of 13% and then promising to cover his losses if the currency will fall even more.
Harris boldly predicted, “In fact, if he wins, the currency should collapse because there will be no trust, and he has created this artificial scenario that cannot be sustained for a long period of time.”
In addition, Erdogan’s earlier fiscal campaign promises – such populist moves as raising wages and lowering the retirement age – may now be unfulfilled, as more public funds will need to be channeled into rebuilding entire cities and towns.
Turkey’s economic downturn was driven by a combination of high global energy prices, the Covid-19 pandemic and the war in Ukraine, and mainly by Erdogan’s economic policies, which lowered interest rates despite skyrocketing inflation, leading to The Turkish lira fell to a record low against the dollar. Turkey’s foreign exchange reserves have fallen sharply in recent years, while Ankara’s current account deficit has widened sharply.
The Turkish lira has lost almost 30% of its value against the dollar over the past year, severely damaging the purchasing power of Turks and undermining Erdogan’s popularity.
Turkey’s opposition parties have not yet nominated their candidate. The strongest potential rival, Istanbul Mayor Ekrem Imamoglu, was arrested and given a political ban in December over charges that his allies say are politically motivated and are being used solely to prevent him from running for president.
In recent years, investors have been withdrawing their money en masse from Turkey. One of the top emerging markets gurus, Mark Mobius of Mobius Capital Partners LLP, remains optimistic despite the earthquake and economic troubles.
“When it comes to investing in Turkey, we still believe that it is a profitable place to invest,” Mobius said. “In fact, we have investments there. The reason is that the Turks are so flexible, so able to adapt to all these cataclysms and problems … even with high inflation, which is with a very weak Turkish lira … So it’s not like that. We are not at all afraid of investing in Turkey.”
Mobius noted the glaring problem of Turkey’s preparations for an earthquake, which could soon become an obstacle to Erdogan’s chances in the elections.
“This is one of the big problems, building codes in some of these areas are not up to par,” he said.
NATO and the powerful role of Turkey on the world stage
Internationally, Turkey’s future affects the war in Ukraine, given Erdogan’s role as an intermediary between Ukraine and Russia. Turkey is a major member of NATO, which still stands in the way of Sweden and Finland joining a powerful defense alliance.
Ankara is also brokering the Black Sea Grain Initiative between Ukraine and Russia, which allows Ukraine’s vital grain supplies to be exported to the rest of the world despite Russia’s naval blockade of Ukrainian Black Sea ports.
Erdogan’s response to the earthquakes and subsequent election results will have an impact on all of this.
Russian President Vladimir Putin is expected to meet with Turkish President Recep Tayyip Erdogan on Thursday.
Anadolu Agency | Anadolu Agency | Getty Images
Turkey will get some relief from Western pressure on its stance on NATO after the earthquakes, but not for long, says Sinan Ulgen, chairman of the Istanbul-based Center for Economics and Foreign Policy.
“It will be temporary,” Ulgen said. “Turkey will consider a few weeks of respite, but after that it will return to business on the foreign policy side.”
At the moment, Western allies and countries from all over the world are sending aid and rescue teams to help Turkey deal with natural disasters. Ankara will need to allocate huge public funds to support those in need and rebuild all areas affected by the earthquakes.
“The positive side is that Turkey has fiscal space,” Ulgen said. Turkey’s public debt to GDP ratio is around 34%, which is very low compared to the US and Europe. According to him, this “means that Turkey has room for fiscal spending, even if it means a significant increase in the public debt ratio.”
As a large country, Turkey has significant potential to deal with natural emergencies. However, Ulgen added, “regardless of the available capacity, unfortunately, it will not be enough to respond to this kind of disaster.”