Turkey’s earthquake comes at a critical time for the country’s future

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Civilians search for survivors under the rubble of collapsed buildings in Kahramanmaras, near the epicenter, the day after a 7.8-magnitude earthquake struck the southeast of the country, on February 7, 2023.

Adam Altan | AFP | Getty Images

The lives of millions across Turkey and Syria were changed forever on Monday, as two back-to-back earthquakes sent shockwaves across hundreds of miles.

With a difference of nine hours from the earthquakes, with a magnitude of 7.8 and 7.5 on the Richter scale, the earthquakes rocked Turkey and Syria and were the strongest earthquakes in the region for nearly a century.

At the time of writing, the death toll from the earthquakes is over 12,000, and many more are still missing and seriously injured. The World Health Organization estimated the number of people affected by the disaster at 23 million. At least 6,000 buildings collapsed, with many residents still inside. Rescue efforts remain a top priority, with some 25,000 people deployed to Turkey and thousands more sent from abroad – but a harsh winter storm now threatens the lives of survivors and those still trapped under the rubble.

Syria, devastated by 12 years of war and terror, is the least prepared to deal with such a crisis. Its infrastructure is severely depleted, and the country remains under Western sanctions. Thousands of those living in the affected areas are already refugees or internally displaced.

As the dust of disaster continues to settle, regional analysts are focusing on the spillover, long-term impact the catastrophe could have on Turkey, a country of 85 million already mired in economic troubles — and which has a military, an economy, and politics that have a significant impact far beyond its borders.

A decisive year for Turkey

This year will be an important turning point for Turkey, as it approaches the presidential elections on May 14. The outcome of that election – whether current President Recep Tayyip Erdogan remains in power or not – has dire consequences for Turkey’s population, economy and currency. and democracy.

Erdoğan’s response to the disaster — and possible calls for accountability for why so many buildings were not adequately designed to withstand such tremors — will now play a major role in his political future.

“If the rescue effort is mishandled and people get frustrated, there is a backlash,” Mike Harris, founder of the Cribstone Strategic Macro, told CNBC on Tuesday. “The other issue, of course, is which buildings and which ones were demolished. To the extent that they were built under new laws and the authorities did not impose regulations, there could be a dangerous backlash for Erdogan. So Erdogan lost control of the narrative.”

Erdogan called elections for early May amid a national cost-of-living crisis, with domestic inflation exceeding 57% – down from more than 80% between August and November. Many analysts say the move reveals Erdoğan’s urgency to secure another term before his controversial economic policies backfire.

Harris described the president creating “this strange situation where inflation is at 80%, but he needs to keep the currency stable between now and the election.”

Through very unorthodox policies, Erdogan has found “a very creative way, a very expensive way to remove the dollar from the economy, basically,” he said, giving examples such as allowing Turks to keep their bank deposits at an interest rate of 13%, and then promising to cover their losses, If the currency depreciates further.

Harris boldly predicted: “Indeed, the coin should collapse if he wins, because there will be no confidence and he has created this artificial scenario that cannot continue for a long period of time.”

In addition, Erdogan’s previous pre-election financial promises – populist moves such as higher salaries and lowering the retirement age – may now be impossible, as more public money would have to be directed towards rebuilding entire cities and towns.

economic concern

Turkey’s economic downturn has been driven by a combination of soaring global energy prices, the COVID-19 pandemic and the war in Ukraine, and mostly, by economic policies directed by Erdogan that have cut interest rates despite high inflation, sending the Turkish lira into a tailspin. A record low against the dollar. Turkey’s foreign exchange reserves have fallen sharply in recent years, and Ankara’s current account deficit has ballooned.

The Turkish lira has lost nearly 30% of its value against the dollar in the past year, which has severely damaged the purchasing power of Turks and hurt Erdogan’s popularity.

The Turkish opposition parties have not presented their candidate yet. The strongest potential challenger, Istanbul Mayor Ekrem Imamoglu, was arrested and placed under a political ban in December over charges his allies say are politically motivated and used solely to prevent him from running for president.

In recent years, investors have withdrawn their money from Turkey in large numbers. Mark Mobius, a senior emerging markets strategist, of Mobius Capital Partners LLP, remains optimistic despite the earthquake disaster and economic woes.

“When it comes to investing in Turkey, we still think it is a good place to invest,” said Mobius. “Actually, we have investments there. The reason is that the Turks are very resilient, able to adapt to all these disasters and problems… Even with inflation rising with the weakness of the Turkish lira… It doesn’t scare us at all to invest in Turkey.”

Mobius noted the stark issue of preparing for the earthquake in Turkey, which may soon haunt Erdogan’s chances in the elections.

“This is one of the big problems,” he said. “The building codes in some of these areas are not up to par.”

The strong role of NATO and Turkey on the world stage

On the international front, Turkey’s future affects the war in Ukraine, given Erdogan’s role as a mediator between Ukraine and Russia. Turkey is the main NATO member still standing in the way of Sweden and Finland joining the powerful defense alliance.

Ankara is also brokering the Black Sea Grain Initiative between Ukraine and Russia, which allows for vital supplies of grain to be exported from Ukraine to the rest of the world despite Russia’s naval blockade of Ukraine’s Black Sea ports.

Erdoğan’s response to the earthquakes – and his subsequent electoral performance – will have an impact on all of these.

Russian President Vladimir Putin is expected to meet Turkish President Recep Tayyip Erdogan on Thursday.

Anadolu Agency | Anadolu Agency | Getty Images

Sinan Ulgen, head of the Center for Economics and Foreign Policy in Istanbul, says Turkey will get some respite from Western pressure on its stance on NATO in the aftermath of the earthquakes, but not for long.

“It will be temporary,” Ulgen said. “Turkey will consider a reprieve of a few weeks, but after that it will return more to work on the foreign policy side.”

Right now, Western allies and countries around the world are sending aid and rescue teams to help Turkey’s disaster relief efforts. Ankara will need to release massive public spending to support the needy and rebuild all earthquake-affected areas.

“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 United States 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 a great capacity to deal with natural emergencies. However, Ulgen added, “No matter what capacity is available, it will unfortunately not be sufficient to respond to this type of disaster.”

Correction: This story has been updated to correctly reflect the epicenters of the earthquakes in Turkey and Syria.

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