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Turkey’s coronavirus-related economy package criticized by many

Turkish President Recep Tayyip Erdogan on Wednesday announced a 21-point economic package in a bid to curb the impact of the coronavirus pandemic on Turkey’s economy.

However, experts immediately criticized the 100 billion lira ($15.4 billion) stimulus package – which consists mainly of postponing debt payments and reducing the tax burden in various sectors.

The economic plan, dubbed the Economic Stability Shield, came a day after the first death due to the novel coronavirus and the doubling of confirmed cases in the country.

It notably aims to protect businesses across various sectors, including retail, malls, iron-steel, automotive, logistics, and textile.

However, critics said while there are precautionary measures in the package for companies but nothing for employees, as well as the unemployed.

“It is surprising that there is nothing in the package with regard to supports for unemployment. There could be something in the package in terms of broadening [the scope of] unemployment compensation and extending the time period for compensations,” said Prof Seyfettin Gursel from the Bahcesehir University Center for Economic and Social Research (BETAM).

Under Erdogan’s plan, accommodation tax will be suspended until November to support the vital tourism sector. Debt repayments of companies will be postponed for a minimum of three months, while value-added tax and social security payments for various sectors will also be deferred.

Emin Capa, a prominent Turkish economist, further emphasized the absence of low-incomers and small businesses in the economic plan.

“Even the United States (US), under the [Donald] Trump administration, will dole its citizens. [Well,] where are the low-incomers and small businesses in the [Turkey’s economic] package. People are struggling to pay their house rents and credit card debts. There needs to be a household package to support them. Payments for electricity, gas, and water should be postponed for 6 months,” the economist tweeted.

The Trump administration is currently planning to send checks directly to Americans as part of a $1 trillion stimulus package in a bid to help households and businesses.

Economist Ugur Gurses claimed that the legal reserves of the Central Bank (TCMB) are meant to be used in such times when direct payments to the public are needed.

“However, the reserves have been used [spent]. With the legal reserves, it could have been easily paid millions of people in a difficult situation,” Gurses argued.

In July last year, Turkey’s AKP-dominated parliament ratified an economy law that amended the allocation of central bank legal reserves.

With the law, 10 percent, instead of the previous 20 percent of central bank profits have been set aside as legal reserves, an act transferring the central bank’s legal reserves to the country’s deteriorating budget.

The legal reserves are set aside by the central bank from profits to be used in extraordinary circumstances.

According to Prof Cem Baslevent from Istanbul Bilgi University, one of the 21-point supports in the package has already been declared by the ruling Justice and Development Party (AKP) government.

“In the package, the support for minimum wage is mentioned. However, this support has already been declared at the beginning of the year,” the academician said.

The package is monetarily insufficient, according to Gursel Tekin, a lawmaker from the main opposition Republican People’s Party (CHP).

“The US has announced a $1 trillion stimulus package. Germany, the United Kingdom (UK), and the European Commission (EC) have allocated 600, 400, and 480 billion euro [respectively] in an attempt to support the economy. [However,] Erdogan’s package is $15 billion, [just] 2 percent of gross domestic product,” the MP said.

Another CHP MP, Tuncay Ozkan, criticized the reduction in the VAT rate for domestic air transportation, in the meantime the AKP government is urging the public to stay home amid the outbreak.

“While [Erdogan] calls on the public to stay at home in order to curb the spread, the VAT rate has been reduced to 1% for domestic flights. However, there is no VAT reduction for cleaning and hygiene products,” Ozkan said.

 

Erdogan advises Turks to stay home, acts to boost economy against coronavirus

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