Earthquake in Turkey: Cost of damage incurred may exceed $ 60 billion

According to the report of the Istanbul Chamber of Certified Public Accountants Financial Advisors (ISMMMO), the cost of two major earthquakes centered in Kahramanmaraş may exceed 55-60 billion dollars.

The number of casualties in the Kahramanmaraş-based earthquakes exceeded 45 thousand, the number of injured exceeded 100 thousand, and the number of destroyed and severely damaged buildings exceeded 160 thousand.

The Istanbul Chamber of Certified Public Accountants Financial Advisors (ISMMMO) published a report on the earthquakes that shook Turkey. According to the analysis in the bulletin prepared by ISMMMO’s board of expert academics, the cost of two major earthquakes that occurred on February 6 may exceed $ 55-60 billion.

The report said, “According to the latest calculations of the Ministry of Environment and Urbanization, 520 thousand independent sections in 164 thousand buildings appear to have been destroyed or severely damaged. When looking at direct costs; if the square meter price is taken as 10 thousand TL, the cost of housing increases to over 40 billion dollars when infrastructure is added. When the workplace, vehicle, goods and debris removal are added to this amount, the cost exceeds 45 billion dollars. In general, about 30 percent of direct costs have indirect effects, i.e. loss of labor and working days, loss of value added, loss of national income. When we add this, the total cost reaches 55 – 60 billion dollars. If we take into account the risk of damage to many more buildings, the cost may go higher.”

STAGFLATION WARNING

In the report, economists pointed out that earthquakes generally create a supply-side shock, and the first effect is contraction and inflation, called ‘stagflation’.

“EVEN IF THE EXCHANGE RATE DOES NOT CHANGE, INFLATION MAY INCREASE”

In the bulletin where the earthquake effect on inflation is evaluated, following was shared; “We expected inflation to fall with the base effect by the end of April. The course of exchange rates will continue to be the most important determinant on inflation. Even if we assume that exchange rates will remain horizontal for a while, inflation dynamics may turn up again. In the report, it was also estimated that the Budget Deficit / GDP ratio would see a burden at the level of 1.5 – 2 percent when the magnitude of the earthquake is taken into account.