Erdogan Cancels Lockdown in Turkey, Citing Economic Fallout

(Bloomberg) --

Turkey's President Recep Tayyip Erdogan canceled plans to reimpose lockdowns in major cities to avoid further damage to the economy.

Erdogan scrapped the proposal even after the number of coronavirus cases jumped by almost 1,000 on Thursday, compared with about 700 in previous days. His announcement came about 12 hours after the Interior Ministry unexpectedly announced curfews would resume in Istanbul, Ankara and 13 other municipalities this weekend.

“It has been understood that the decision would lead to some social and economic consequences,” Erdogan said in a Twitter post Friday.

Turkey reopened restaurants, beaches and ended travel restrictions June 1 to restore some measure of mobility to its population of 83 million who've been subjected to curfews and lockdowns since March. The International Monetary Fund forecasts Turkey's economy may shrink 5% this year as a result of measures taken to contain the spread of the coronavirus pandemic.

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Erdogan is “taking a risk here,” Timothy Ash, a strategist at BlueBay Asset Management in London, said in a research note, drawing a comparison with increased infections in Ukraine and Kazakhstan, where lockdowns have also been eased.

“Lockdowns had been reimposed due to fears over rising infections, but Erdogan seems to have overridden these due to concerns over the economy,” Ash said.

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The government is focused on reviving the economy even if it comes at the expense of fiscal discipline, Treasury and Finance Minister Berat Albayrak told reporters Friday, according to Bloomberg HT. The state's current priority is to shield employment and sectors that are affected by the pandemic, with the Labor Ministry working on an employment package, he said.

Total fiscal support to contain the economic fallout from the coronavirus has reached 5% of Turkey's gross domestic, or about $750 billion, Albayrak said.

A relatively low level of public debt gives the authorities some room to contain the economic disruptions from the pandemic. As of 2019, the government's debt stock stood at 33.1% of GDP. BNP Paribas SA estimates that government debt-to-GDP in emerging markets will jump by about 8 percentage points to an average of 50% in 2020.

The government still faces fiscal constraints. Turkey posted its largest budget deficit in about a decade last year. The shortfall is widening as measures to contain the pandemic paralyzed economic activity, while spending jumped and tax deferrals chipped away at government revenue.

The number of confirmed coronavirus cases rose by 988 on Thursday to 167,410, according to data announced by Health Minister Fahrettin Koca. Fatalities rose by 21 to 4,630.