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Turkey Unveils $15.4 Billion Plan to Counter Virus Outbreak

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Turkey Unveils $15.4 Billion Plan to Counter Virus Outbreak

  • Stimulus adds to central bank action to lower borrowing costs
  • Infections on rise in Turkey in threat to tourism, industry
A Metropolitan Municipality worker sprays disinfectant on a bus in Istanbul, Turkey, on March 14. 

A Metropolitan Municipality worker sprays disinfectant on a bus in Istanbul, Turkey, on March 14. 

Photographer: Kerem Uzel/Bloomberg
A Metropolitan Municipality worker sprays disinfectant on a bus in Istanbul, Turkey, on March 14. 
Photographer: Kerem Uzel/Bloomberg

Turkish President Recep Tayyip Erdogan unveiled a 100 billion-lira ($15.4 billion) plan to help businesses ride out the economic storm caused by the coronavirus pandemic.

The government will introduce a set of new measures from tax cuts and payment deferrals for businesses to an increase in minimum pension payouts, Erdogan said Wednesday after meeting with senior officials and business leaders.

Turkey is following countries around the world in pledging stimulus in coordination with central bank action as the global economy grinds to a halt. Infections in Turkey are on the rise in a growing threat to tourism and manufacturing just as growth was beginning to take off after a downturn.

The steps announced Wednesday include:

  • Sectors including retail and transportation will receive a six-month deferral on some tax and insurance premium payments
  • Erdogan vowed to provide the necessary support to Turkish Airlines
  • Downpayment for house purchases up to 500,000 Turkish lira will be cut to 10% from 20%
  • Primary debt and interest payments of companies whose cash flows deteriorated due to the outbreak will be deferred by at least three months
  • Turkey’s Credit Guarantee Fund limit will be doubled to 50 billion liras
  • The government will cut the value-added tax on domestic air travel to 1% from 18%
  • Minimum payouts for pensioners will be increased to 1,500 liras a month; the government will make an early annual bonus payment to pensioners

Erdogan said exporters will receive stock financing support “in order to maintain capacity utilization ratios,” while accommodation tax will be lifted until November. The government will allocate an additional 2 billion liras for cash support to families in need, he said.

Ahead of the meeting, businesses had asked for support from the government, including tax cuts, deferral of tax and loan payments, and cheaper loans through the Credit Guarantee Fund.

Turkey’s Health Minister Fahrettin Koca confirmed the country’s second death in a tweet late Wednesday as well as 93 new cases, which increased the total of confirmed coronavirus patients to 191.

Erdogan urged citizens not to leave their homes until the danger is over. “If we comply with the announced measures all together, we can limit the period of staying home to three weeks,” he said.

Turkey’s Emergency Steps Push Real Rate Near World’s Lowest

The government’s steps come on the heels of an emergency response by the nation’s central bank, which introduced a slew of measures aimed at easing lenders’ access to liquidity. It also lowered its benchmark interest rate by a full percentage point, pushing official borrowing costs adjusted for inflation near the world’s lowest.

Earlier on Wednesday, Erdogan warned of serious economic consequences as virus has virtually brought daily life to a standstill. Still, he said Turkey could emerge as an alternative manufacturing destination to China, where the virus spread first.

“The developments following the virus outbreak and a drop in oil prices will offer additional advantages to Turkey,” Erdogan said.

— With assistance by Selcan Hacaoglu

(Updates with new bullet on government cutting downpayment for house purchases)