The devastating earthquakes in Kahramanmaraş are expected to cost billions of dollars. In addition, it is predicted that the cost of the earthquake will negatively affect the growth in the Turkish economy.
The Kahramanmaraş-centered earthquake also affected Malatya, Adıyaman, Hatay, Kilis, Adana, Şanlıurfa and Diyarbakır. As of today, the loss of life in the earthquake exceeded 36 thousand, the number of injured exceeded 100 thousand and the number of destroyed buildings exceeded 6 thousand.
With the first calculations of the economists, different estimates of the cost of the earthquake emerged. However, it has become a general expectation that the earthquake also caused a decline in growth.
IT WILL AFFECT GROWTH
The earthquake is expected to cause billions of TL rebuilding costs in the Turkish economy and cause a decline in growth this year. While 10 million people lived in 13,42 provinces affected by the earthquake, cities such as Adana, Hatay and Gaziantep stand out with their agricultural and industrial basins.
According to TUIK's 2021 data, the share of the region consisting of 10 provinces affected by the earthquake in GDP is 9,3 percent. In terms of sectors, the share of the earthquake zone in agriculture is 14,3 percent and its share in industry is 11,2 percent.
Although it is not known exactly how big the production loss will be, the loss of 11 percent in electricity consumption data compared to a week ago is an indication that the earthquake will have significant effects on economic growth.
TÜRKONFED: 84 BILLION DOLLARS MAY BE DAMAGED
The business organization Turkish Enterprise and Business Confederation (TÜRKONFED) stated in its preliminary report on the subject, “The Kahramanmaraş earthquake has a total of 70,75 billion dollars, of which 10,4 billion dollars is housing damage, 2,91 billion dollars is national income loss and 84,06 billion dollars is lost of workdays. “It is expected to cause billions of dollars in damage,” he said.
In the report, "It can be estimated that the exports of 10 provinces that were exposed to disasters, in parallel with the decrease in the contribution of the provinces to the national income, may fall below the level of 15 billion dollars, with the impact of the deterioration of the port infrastructure that withstands exports."
JP MORGAN: DAMAGE WILL BE $25 BILLION
The US investment bank JPMorgan also estimated that the direct damage to buildings and infrastructure caused by the devastating earthquakes in Kahramanmaraş would cost 2,5 percent of GDP, or $25 billion.
“The earthquake in Turkey caused tragic loss of life and will have significant economic consequences,” said Fatih Açelik, an economist at JPMorgan, in a note to the bank's customers.
GOLDMAN: ECONOMIC IMPACT MAY BE LESS THAN EXPECTED
Goldman Sachs economists, on the other hand, stated that it is still early to determine the damage of the earthquakes to the infrastructure and general economy in Turkey, but the findings from previous earthquakes stated that the effect on growth may be surprisingly small compared to the damage to the capital stock.
Goldman Sachs economists Clemens Grafe and Başak Edizgil made the following assessments in their note:
“The 1999 Marmara earthquake affected an area whose share of GDP was more than three times greater than the current earthquake. An academic study revealed that the cost of that earthquake amounted to 1,2 percent of GDP. Considering these results and the region's share in growth, we calculate that the cost of last week's earthquake to GDP may be well below 1 percent.”
'THE 35 BILLION CAN FIND'
According to the report prepared by strategist Evren Kırıkoğlu, founder of Sardis Research Consulting, the total cost of the earthquake is estimated to be 25-35 billion dollars.
The report predicted a loss of 2023 billion dollars with a 1 percent decrease from 8 growth. In addition, damage replacement costs were estimated between 17-27 billion dollars, depending on the public's expenses and TOKİ's construction cost.
Thus, the total cost of the earthquake was predicted to be between 25-35 billion dollars. In the report, it was stated that some of this cost could be recovered if the growth in the coming years is higher than normal due to the post-earthquake recovery.
CAN DOWN GROWTH 1-2 POINTS
All three economists, whose calculations Reuters consulted, stated that a cost of around $50 billion is possible. “The cost of the earthquake seems to be around 50 billion dollars, but it is necessary to take into account its many side effects,” said an economy official.
Economists calculated the impact of the earthquake on national income as a loss between 0,6 and 2 points. Economists took a scenario where production was disrupted by 50 percent and this decline was compensated in 6-12 months.
“Billions of liras of damage will occur,” a senior official told Reuters. Of course, it will take time to determine the exact framework for this, but it is possible to expect a decrease of at least 1 percent, maybe 2 percentage points from the projected growth this year," he said.
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