After first seen in December 2019 in Wuhan, China, the coronavirus -which leads to Covid-19 disease- has spread to 192 countries in only three months. The number of confirmed coronavirus cases has exceeded 340,000 globally with the number of deaths exceeding over 14,000 as of 23 March 2020. The first case of coronavirus in Turkey was detected on 11 March 2020. The number of cases in Turkey had increased to 1236 in the following 13 days with 30 citizens losing their lives due to this virus.
Turkey has taken the following steps in order to mitigate the effects of the coronavirus in Turkey:
- Flights with 71 countries -where the coronavirus cases are widely observed- have been temporarily locked down and the border gates are closed,
- The universities and schools have been suspended for 3 and 2 weeks respectively as of 16 March 2020,
- All cultural and art activities, scientific activities, conferences, meetings etc. have been postponed until the end of April while the entertainment places such as bars, casinos, night clubs, museums and libraries have been closed,
- The common places where people usually get together such as coffee houses, cafés, cinemas, theaters, concert halls, wedding halls, Turkish baths, gyms, cyber cafes, indoor children playgrounds, funeral houses, etc. have been temporarily closed,
- All sports organizations in Turkey have been postponed for an indefinite period of time and
- Citizens have been warned not to leave their houses unless they really need to.
A meeting was held on 18 March 2020 with an attempt to mitigate the impacts of the protective measures against coronavirus on the economy. The President Recep Tayyip Erdoğan chaired a meeting with a wide participation from ministers, directors of public institutions, organizations and non-governmental organizations. As a result of this meeting a package called “The Economic Stability Shield” has been unveiled. The details and sectoral effects of this package are as follows:
General Regulations for All Sectors:
The following decisions have been taken for all companies affected by coronavirus regardless of their respective sectors;
- The principal debts of the credits and their interest payments owed to the banks by the companies -whose cash flow has been disturbed due to the measures taken against the COVID-19 outbreak- shall be extended for a minimum of 3 months and additional financing support shall be provided to such companies when necessary.
- The limit of the Credit Guarantee Fund shall be increased from 25 billion Turkish Liras to 50 billion Turkish Liras. The companies and SMEs -which need liquidity and have collateral shortages due to the recent developments- shall be prioritized in the provision of commercial credits.
- Credit registry of the firms -which defaulted in paying their debts in April, May and June due to the protective measures taken against the spread of virus- shall indicate “force majeure” note for the payments in arrears.
- The provisions of flexible and remote working models in the legislation shall be made more effective.
- Short-Time Working Allowance shall be implemented. The processes needed to be followed to benefit from this allowance shall be facilitated and accelerated. Therefore, temporary income support will be provided to employees who work at the suspended workplaces while the cost to employers will be reduced.
- In order to ensure the continuance in employment, the 2-month compensatory work period shall be increased to 4 months.
- Minimum wage support shall continue.
Regulations Concerning the Tourism Sector:
Tourism sector is one of most-affected sectors due to the coronavirus. Therefore, the following decisions have been taken in favor of tourism sector on top of the general economic support provisions given above:
- April, May and June payments of withholding tax returns, VAT withholding payments and social security premiums have been postponed for 6 months (the following sectors can also benefit from this support: Retail, Shopping Mall, Iron and Steel, Automotive, Logistics-Transportation, Cinema-Theatre, Food-Beverage and Textile-Apparel).
- The accommodation tax is not going to be collected until November 2020.
- The servitude payments and share payments concerning hotel leases are postponed for 6 months for April, May and June.
- VAT rate is reduced from 18 percent to 1 percent for 3 months for domestic air transportation.
Regulations Concerning the Real Estate Sector:
In order to avoid a new period of stagnation in the real estate sector, the following additional decision has been taken;
- The creditable amount for residential buildings with a price tag below TRY 500,000.- shall be increased from 80 percent to 90 percent with the minimum advance payment reduced to 10 percent.
Regulations Concerning Export:
The exports to countries -to which the flights have been locked down already- have been affected significantly by the current situation. For this reason, the following decision has been taken for exporters;
- The exporter shall be provided stock financing support in order to maintain the capacity utilization rates during the temporary slowdown in exports.
Regulations Concerning Tradesmen and Craftsmen:
The following decision has been taken for the loan debts of tradesmen and craftsmen to Halkbank;
- Loan debts, principal and interest payments of April, May and June of tradesmen and craftsmen to Halkbank shall be postponed for 3 months interest-free providing that the tradesmen and craftsmen declare to the bank that their business is affected by the pandemic and serve a request to this end.
Regulations Concerning Citizens:
In order to reduce the economic impact of the coronavirus on citizens, the following decisions have been taken;
- The introduction of loan packages with social purpose under favorable and advantageous conditions for citizens shall be encouraged.
- Periodic follow-up program consisting of social service and home-health services shall be operational for elderly people over 80 years of age who live alone.
- The lowest pension shall be raised to TRY 1,500.-.
- The holiday bonus of pensioners shall be paid in early April.
- An additional source of TRY 2 billion shall be allocated as a cash support to families in need as per the criteria set out by the Ministry of Family, Labor and Social Services.
The Statements of Minister of Treasury and Finance
After the announcement of the package called The Economic Stability Shield on 19 March 2020, the Minister of Treasury and Finance has made several statements examining both the package and the impact of the virus on the economy. The Minister stated that the first quarter of 2020 would be closed with growth rate above the expectations and that Turkey would not have any difficulties in meeting its 2020 targets. The Minister also stated that they could work on a support package for the mining sector which was heavily affected by the current events as they would generally export their products to China, but the first priority will be given to the real sector.
First published by Gün + Partners, in 23.03.2020