Turkey's earthquake caused $34 billion in damage. It could cost Erdogan the election

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The devastating earthquake that hit Turkey on February 6 killed at least 45,000 people, rendered millions homeless across almost a dozen cities and caused immediate damage estimated at $34 billion – or roughly 4% of the country's annual economic output, according to the World Bank.

But the indirect cost of the quake could be much higher, and recovery will be neither easy nor quick.

The Turkish Enterprise and Business Confederation estimates the total cost of the quake at $84.1 billion, the lion's share of which would be for housing, at $70.8 billion, with lost national income pegged at $10.4 billion and lost working days at $2.91 billion.

'I do not recall… any economic disaster at this level in the history of the Republic of Turkey,' said Arda Tunca, an Istanbul-based economist at PolitikYol.

Turkey's economy had been slowing even before the earthquake. Unorthodox monetary policies by the government caused soaring inflation, leading to further income inequality and a currency crisis that saw the lira lose 30% of its value against the dollar last year. Turkey's economy grew 5.6% last year, Reuters reported, citing official data.

Economists say those structural weaknesses in the economy will only get worse because of the quake and could determine the course of presidential and parliamentary elections expected in mid-May.

Still, Tunca says that while the physical damage from the quake is colossal, the cost to the country's GDP won't be as pronounced when compared to the 1999 earthquake in Izmit, which hit the country's industrial heartland and killed more than 17,000. According to the OECD, the areas impacted in that quake accounted for a third of the country's GDP.

The provinces most affected by the February 6 quake represent some 15% of Turkey's population. According to the Turkish Enterprise and Business Confederation, they contribute 9% of the nation's GDP, 11% of income tax and 14% of income from agriculture and fisheries.

'Economic growth would slow down at first but I don't expect a recessionary threat due to the earthquake,' said Selva Demiralp, a professor of economics at Koc University in Istanbul. 'I don't expect the impact on (economic) growth to be more than 1 to 2 (percentage) points.'

There has been growing criticism of the country's preparedness for the quake, whether through policies to mitigate the economic impact or prevent the scale of the damage seen in the disaster.

How Turkey will rehabilitate its economy and provide for its newly homeless people is not yet known. But it could prove pivotal in determining President Recep Tayyip Erdogan's political fate, analysts and economists say, as he seeks another term in office.

Solid fiscal position

The 2023 government budget was released before the earthquake. It had been designed to increase spending in an election year and foresee a deficit of 660billion lire ($34.9 billion).

Analysts believe that the government has already announced measures to boost Erdogan's popularity. These include a near 55% increase of the minimum wage and lower housing loans.

Economists believe that Turkey's fiscal situation is strong. When compared to its economic output, Turkey's budget deficit is lower than other emerging markets such as India, China, and Brazil. This gives the government more money to spend.

Selva Bahar Baziki, Bloomberg Economics, stated that Turkey starts in a relative fiscal strength. The government will most likely exceed their budget targets due to the necessary earthquake spending. This would be the year for it, given the human toll.

Quake-related public spending is estimated at 2.6% of GDP in the short run, she told CNN, but could eventually reach as high as 5.5%.

Budget shortfalls are usually filled by government borrowing or tax increases. Both are possible options, according to economists. However, post-quake taxation is a sensitive topic in the country and could be risky in an election.

Turkey implemented an "earthquake tax" after the 1999 earthquake. It was originally introduced to cushion economic losses, but it became a permanent tax.

There has been concern in the country that the state may have squandered those tax revenues, with opposition leaders calling on the government to be more transparent about what happened to the money raised. When asked in 2020, Erdogan said the money ' was not spent out of its purpose.' Since then, the government has said little more about how the money was spent.

"The earthquake preparedness funds have been used to fund projects like road constructions and infrastructure building-ups. Tunca stated that there are other reasons than earthquake preparedness. Tunca stated that no buffers or cushions were in place to reduce the economic impact of such disasters.

The Turkish presidency didn't respond to CNN's request for comment.

Analysts believe it is too early to predict the impact of Erdogan's economic downturn on his chances of re-election.

The president's approval rating was low even before the quake. In a December poll by Turkish research firm MetroPOLL, 52.1% of respondents didn't approve of his handling of his job as president. A survey a month earlier found that a slim majority of voters would not vote for Erdogan if an election were held on that day.

Reuters reported that two polls conducted last week showed that the Turkish opposition did not gain new support. This was partly due to the failure of the candidate to be named and partly because the party has no plan to rebuild the areas damaged by the earthquake.

Voter defection

The majority of the provinces worst affected by the quake voted for Erdogan and his ruling AK Party in the 2018 elections, but in some of those provinces, Erdogan and the AK Party won with a plurality of votes or a slim majority.

Those provinces are some of the poorest in the country, the World Bank says.

Research conducted by Demiralp as well as academics Evren Balta from Ozyegin University and Seda Demiralp from Isik University, found that while the ruling AK Party's voters' high partisanship is a strong hindrance to voter defection, economic and democratic failures could tip the balance.

'Our data shows that respondents who report being able to make ends meet are more likely to vote for the incumbent AKP again,' the research concludes. 'However, once worsening economic fundamentals push more people below the poverty line, the possibility of defection increases.'

This could allow opposition parties to take votes from the incumbent rulers 'despite identity-based cleavages if they target economically and democratically dissatisfied voters via clear messages.'

Tunca fears Erdogan's economic future could be harmed by the earthquake-related economic fallout.

'The magnitude of Turkey's social earthquake is much greater than that of the tectonic one,' he said. 'There is a tug of war between the government and the opposition, and it seems that the winner is going to be unknown until the very end of the elections.'

Nadeen Ebrahim and Isil Sariyuce contributed to this report.

This article has been corrected to say that the research, not the survey, was conducted by the academics.

The digest

Sub-Saharan African countries repatriate citizens from Tunisia after ‘shocking' statements from country's president

Sub-Saharan African countries including Ivory Coast, Mali, Guinea and Gabon, are helping their citizens return from Tunisia following a controversial statement from Tunisian President Kais Saied, who has led a crackdown on illegal immigration into the North African country since last month.

Background: In a meeting with Tunisia's National Security Council on February 21, Saied described illegal border crossing from sub-Saharan Africa into Tunisia as a 'criminal enterprise hatched at the beginning of this century to change the demographic composition of Tunisia.' He said the immigration aims to turn Tunisia into 'only an African country with no belonging to the Arab and Muslim worlds.' In a later speech on February 23, Saied maintained there is no racial discrimination in Tunisia and said that Africans residing in Tunisia legally are welcome. Authorities arrested 58 African migrants on Friday after they reportedly crossed the border illegally, state news agency TAP reported on Saturday.
Why it matters: Saied, whose seizure of power in 2021 was described as a coup by his foes, is facing challenges to his rule at home. Reuters on Sunday reported that opposition figures and rights groups have said that the president's crackdown on migrants was meant to distract from Tunisia's economic crisis.

Iranian Supreme Leader says schoolgirls' poisoning is an ‘unforgivable crime'

Iranian Supreme Leader Ayatollah Ali Khamenei on Monday said that the poisoning of schoolgirls in recent months across Iran is an 'unforgivable crime,' state-run news agency IRNA reported. Khamenei urged authorities to pursue the issue, saying that 'if it is proven that the students were poisoned, the perpetrators of this crime should be severely punished.'

Background: Concern is growing in Iran after reports emerged that hundreds of schoolgirls had been poisoned across the country over the last few months. On Wednesday, Iran's semi-official Mehr News reported that Shahriar Heydari, a member of parliament, said that 'nearly 900 students' from across the country had been poisoned so far, citing an unnamed, 'reliable source.'
Why it matters: The reports have led to a local and international outcry. While it is unclear whether the incidents were linked and if the students were targeted, some believe them to be deliberate attempts at shutting down girls' schools, and even potentially linked to recent protests that spread under the slogan, 'Women, Life, Freedom.'

Iran to allow further IAEA access following discussions – IAEA chief

Iran will allow more access and monitoring capabilities to the International Atomic Energy Agency (IAEA), agency Director General Rafael Grossi said at a press conference in Vienna on Saturday, following a trip to the Islamic Republic. The additional monitoring is set to start 'very, very soon,' said Grossi, with an IAEA team arriving within a few days to begin reinstalling the equipment at several sites.

Background: Prior to the news conference, the IAEA released a joint statement with Iran's atomic energy agency in which the two bodies agreed that interactions between them will be 'carried out in the spirit of collaboration.' Iranian President Ebrahim Raisi said he hopes the IAEA will remain neutral and fair to Iran's nuclear energy program and refrain from being affected 'by certain powers which are pursuing their own specific goals,' reported Iranian state television Press TV on Saturday.
Why it matters: Last week, a restricted IAEA report seen by CNN said that uranium particles enriched to near bomb-grade levels have been found at an Iranian nuclear facility, as the US warned that Tehran's ability to build a nuclear bomb was accelerating. The president of the Atomic Energy Organization of Iran (AEOI), Mohammad Eslami, rejected the recent IAEA report, which detected particles of uranium enriched to 83.7% at the Fordow nuclear facility in Iran, saying there has been ‘'no deviation' in Iran's peaceful nuclear activities.

Around the region

A new sphinx statue has been discovered in Egypt – but this one is thought to be Roman.

The smiling sculpture and the remains of a shrine were found during an excavation mission in Qena, a southern Egyptian city on the eastern banks of the River Nile.

The shrine had been carved in limestone and consisted of a two-level platform, Mamdouh Eldamaty, a former minister of antiquities and professor of Egyptology at Ain Shams University said in a statement Monday from Egypt's ministry of tourism and antiquities. A ladder and mudbrick basin for water storage were found inside.

The basin, believed to date back to the Byzantine era, housed the smiling sphinx statue, carved from limestone.

Eldamaty described the statue as bearing 'royal facial features.' It had a 'soft smile' with two dimples. It also wore a nemes on its head, the striped cloth headdress traditionally worn by pharaohs of ancient Egypt, with a cobra-shaped end or 'uraeus.'

A Roman stela with hieroglyphic and demotic writings from the Roman era was found below the sphinx.

The professor said that the statue may represent the Roman Emperor Claudius, the fourth Roman emperor who ruled from the year 41 to 54, but noted that more studies are needed to verify the structure's owner and history.

The discovery was made in the eastern side of Dendera Temple in Qena, where excavations are still ongoing.

Sphinxes are recurring creatures in the mythologies of ancient Egyptian, Persian and Greek cultures. Their likenesses are often found near tombs or religious buildings.

to be found in Egypt. But the country's most famous sphinx, the Great Sphinx of Giza, dates back to around 2,500 BC and represents the ancient Egyptian Pharoah Khafre.

By Nadeen Ebrahim

Photo of the day

Ziya Sutdelisi, 53, a former local administrator, receives a free haircut from a volunteer from Gaziantep, in the village of Buyuknacar, near Pazarcik, Kahramanmaras province on Sunday, one month after a massive earthquake struck southeast Turkey.