Effects of Coronavirus on Economy
02.06.2020 | Lal Kavcar
Effects of Coronavirus on Economy
What is pandemic ? It is an outbreak of a disease that occurs over a wide geographic area and affects an exceptionally high proportion of the population : a pandemic outbreak of a disease. COVID-19 began as an epidemic in China, before making its way around the world in a matter of months and becoming a pandemic. During this epidemic, the world has moved away from globall and countries have become introvert. This situation had great effects on the economy of the countries. The world is going through a difficult process. What are the economic movements during the pandemic process? How Turkey is managing this process?
Production and Growth in Turkey With Covid-19
A country’s standard of living depends on its ability to produce goods and services. Within a country there are large changes in the standard of living over time. Productivity refers to the amount of goods and services produced for each hour of a worker’s time . A nation’s standard of living is determined by the productivity of its workers. The factors of production are physical capital , human capital , natural resources and technological knowledge. These are all called production and growth. When we examine this issue before and after the corona virus in Turkey : This virus has both positive and negative effects in terms of production and growth for Turkey. For example, Many of the global brands have partially or completely suspended their activities in China and have shrunk in Asian markets. As a result, direct investment opportunities emerged for Turkey appeared. Due to the assembly of China’s work was welcomed by Turkey in terms of a lot of sectors. Virus also has negative effects on productivity such as unemployment because of curfew (a regulation requiring people to remain indoors between specified hours.) measures taken by the Turkey government to prevent the virus caused great shrinkage in the job markets. When we compare Turkey economy 2019 data and during the virus time in terms of production and growth Turkey’s economy generally has been adversely affected in the process of the virus and the people’s living standard.
Employment In Case of Pandemic
In the virus process, unemployment rates increased in most sectors compared to the past. A person is unemployed if she or he is on temporary layoff , is looking for a job , or is waiting for the start date of a new job. The fact that people working in seasonal jobs lost their job opportunities due to the period and conditions of corona virus. For instance , in the process created by the corona virus, many employees in many sectors, especially in the tourism sector, have lost their jobs periodically. The need for decisions taken by the government of Turkey is prohibited in many countries inside or outside flights. Apart from seasonal unemployment, there is an unemployment that appears in all sectors during pandemic. An example of this type of unemployment , cafes are not working and foreign companies have problems in import and export. This called cyclical unemployment. Cyclical refers to ups and downs in overall economic activity, cyclical unemployment happens when economic activity slows down as result of a recession or an economic crisis. It can be said that the corona virus also affects unemployment in this regard.
Corona Virus and Commercial Banks
Banks in Turkey have shown a lot of activity in the process of corona virus . Examples of these applications work is done on the interest rate of Turkey’s central bank. Turkey’s central bank has decreased reference interest rate by 100 bps. The one – week repo rate has been discounted from 10.75 % to 9.75% The central bank is ensuring it will meet all liquidity requirements for banks. The central bank will begin additional three-month maturity repo tenders. Required reserve ratios have been decreased by 5% for foreign-denominated reserves. According to the quantity theory of money decisions taken should the government of Turkey also extend the maturity of bank loans and interest rates were reduced. As a result, banks were able to provide faster cash access to the public.
Inflation and Deflation During Pandemic
Despite the measures taken by the government of Turkey The Turkish lira has depreciated against hard currencies such as Dollar Pound Euro. The dollar reached its highest in the past 18 months agains the Turkish Lira. As the Turkish lira depreciated, the purchasing power decreased in the country population. People can not get their basic needs due to the increase in prices of basic goods.Because of high level inflation during pandemic. According to the country’s gdp graph, it is observed that living standards have decreased by 5% – 8% compared to last year. This situation causes inflation.
Saving and Investment
A fundamental macroeconomic accounting identity is that saving equals investment.By definition saving is income minus spending. Investment refers to physical investment, not financial investment. That saving equals investment follows from the national income equals national product identity.Although many investors suspended their property investments in the Corona virus process, they used their investments to help their personal needs and the organizations that fight the virus due to the cash need of the process. As can be understood by private savings out of the country during the pandemic period GDP charts despite the measures taken by the government of Turkey had failed to protect the public money Turkey’s government gets the taxes of citizens who improve the most basic needs of the health sector in this process and has been donated to improve. This resulted in a decrease in national and public savings compared to 2019.
Financial Markets on Covid-19
Financial markets are made of institutions through which savers can provide funds directly to borrowers like bond market and stock market. Stock represents a claim to partial ownership in a firm and a claim to the profits that the firm makes. Since the virus is seen within the borders of our country, companies that have met the needs of the health and food sector that the public needs in this process have benefited more from this situation. In terms of the stock market rule. The bond market is a certificate of indebtedness that specifies obligations of the borrower to the holder of the bond. The government of Turkey during the pandemic period obligations ensure that the work required to maintain equilibrium in the market is still continuing . In conclusion, The world has not yet been able to survive this war economically. In this process, we have seen that the effects of the pandemic on the economy are huge and undeniable.the pandemic process is managed this way in our country. When the Turkey’s situations compare with other countries is not bad as Italy but the economy has been badly affected in all respects and a decline has been observed in the country’s welfare compared to previous years. All the countries of the world aim to manage this process in the least way.
Mankiw, N. G. (1998) ‘Principles of Economics’ The Dryden Press, USA. Chapters 25, 26, 27.
COVID 19 effects on Turkey: https://www.kearney.com/documents/783760/825173/COVID19+and+Effects+on+Turkey_v 1.pdf/0cce22fb-e035-f16a-49f170deeb5cc112?t=1585067844932 https://unctad.org/en/PublicationsLibrary/gds_tdr2019_covid2_en.pdf