Türkiye’s 2022 growth figures and the cost of the earthquake

TurkStat announced Türkiye's growth figures for 2022 on Tuesday. According to TUIK's calculations, while the Turkish economy grew by 3.5% in the last quarter of 2022, the annual growth rate was 5.6%. After the growth report of 2022 became clear, eyes were turned to 2023. However, unfortunately, we entered 2023 under the influence of a very large earthquake storm.

2022 GROWTH COMPOSITION

While the Turkish economy grew by 5.6% in 2022, when we look at the branches of economic activity, we see that the highest growth is in finance and insurance activities with 21.8%. It is followed by the services sector with 11.7%. There is a serious contraction of 8.4% in construction.

When we look at the growth composition with the expenditure method, we see that the effect of consumption expenditures is quite high. The growth rate here is 19.7%. On the other hand, it is seen that consumption expenditures weakened in the last quarter of 2022 compared to the previous quarter. Again in the last quarter, the net contribution of exports of goods and services is unfortunately negative. However, when we look at this data annually, we see a positive contribution. Undoubtedly, the strong increase in the first 3 quarters of the year is the main factor. Gross fixed capital formation also made a positive contribution in the last quarter. This data was negative in the previous quarter.

CONSTRUCTION TO CONTRIBUTE MASSIVELY TO 2023 FIGURES

The year 2022 was bad for the construction industry in general. Both the prolonged effects of the pandemic period and the increasing costs have seriously challenged this sector. We have seen astronomical increases in housing prices and rents, as the strain on the sector brought along supply problems.

Meanwhile, expectations for a better 2023 performance of the sector were high. Because the government's emphasis on housing projects, the increase in the number of projects related to social housing, and new housing financing steps for the lower and middle-income groups, a significant acceleration in the construction sector was expected in 2023. Unfortunately, there are also houses that need to be rebuilt after the earthquake. I say unfortunately because a very serious number of houses were either destroyed or severely damaged due to the earthquake.

At the beginning of the week, news about the World Bank's account of the cost of the earthquake in Türkiye appeared on news sites. According to the World Bank's Disaster Assessment Report, the agency expects the cost of earthquake damage in Türkiye to exceed $34 billion. In addition, the World Bank estimates that upgrading and rebuilding costs will be much higher, potentially more than double that, and further increased by disruptions to the economy.

Yet, I would like to remind you that, as I mentioned in my previous columns, it is not exactly possible to make a cost calculation at this stage, only phalanges can be pronounced, and considering externalities and long-term effects, the approximate cost may only emerge at least 1-1.5 years later.