The devastating earthquakes that struck Türkiye last week could result in a loss of up to 1% of the country’s gross domestic product (GDP) this year, said the European Bank for Reconstruction and Development (EBRD) on Thursday.
In its latest report, the ERBD said this is a “reasonable estimate” due to the expected boost from reconstruction efforts later this year, which will offset the negative impact to infrastructure and supply chains.
The magnitude 7.7 and 7.6 earthquakes struck nine hours apart in southeastern Türkiye, and severely hit northern Syria, on Feb. 6, razing thousands of buildings and inflicting severe damage on infrastructure.
Authorities on Thursday revised the death toll from the disaster to 36,187.
The quake-affected provinces are home to some 13.5 million people, or 15% of Türkiye’s population. The region accounts for close to 10% of the country’s gross domestic product (GDP).
“The earthquake affected to a large extent agricultural areas and areas known for light manufacturing, so spillovers to other sectors are limited,” EBRD chief economist Beata Javorcik told Reuters.
Growth for Türkiye, the single biggest recipient of EBRD funds, has been revised down to 3% from 3.5% in 2023, without considering the impact of the earthquake in the estimates.
The bank added that growing external financing requirements and political uncertainty associated with the upcoming elections create significant economic vulnerabilities.
“As depreciation of the Turkish lira outpaced inflation since 2015, Türkiye’s exports have been growing fast, benefiting from lower costs expressed in U.S. dollars,” the report added.
The earthquake’s impact on GDP is unlikely to be as impactful as after the 1999 earthquake in northwest Türkiye, which struck the industrial heartland, IMF Executive Director Mahmoud Mohieldin said on Sunday.
Mohieldin added that, after the initial impact over the next few months, public and private sector investments in rebuilding could boost GDP growth going forward.
Nonetheless, economists and officials estimated the quake would cut economic growth by up to two percentage points this year. The government forecast growth at 5% in 2022, and had estimated growth at 5.5% in 2023 before the quake.
A report published at the weekend by the Turkish Enterprise and Business Confederation (TÜRKONFED) put the cost of the damage at $84.1 billion – $70.8 billion from the repair of thousands of homes, $10.4 billion from loss of national income and $2.9 billion from loss of working days.
It said the main costs would be rebuilding housing, transmission lines and infrastructure; and meeting the short, medium and long-term shelter needs of the hundreds of thousands left homeless.