Bayram Balcı, Philippe Bourmaud et Sümbül Kaya (éd.) Analyses pluridisciplinaires sur la crise sanitaire COVID-19 en Turquie Institut français d’études anatoliennes Turkey’s Economy Amid the COVID-19 Pandemic: Measures and Their Impact Ali Rıza Güngen DOI: 10.4000/books.ifeagd.3827 Publisher: Institut français d’études anatoliennes Place of publication: Istanbul Year of publication: 2021 Published on OpenEdition Books: 17 February 2021 Serie: La Turquie aujourd’hui Electronic ISBN: 9782362450846 http://books.openedition.org Electronic reference GÜNGEN, Ali Rıza. Turkey’s Economy Amid the COVID-19 Pandemic: Measures and Their Impact In: Analyses pluridisciplinaires sur la crise sanitaire COVID-19 en Turquie [online]. Istanbul: Institut français d’études anatoliennes, 2021 (generated 19 février 2021). Available on the Internet: <http:// books.openedition.org/ifeagd/3827>. ISBN: 9782362450846. DOI: https://doi.org/10.4000/ books.ifeagd.3827. This text was automatically generated on 19 February 2021.  Turkey’s Economy Amid the COVID-19 Pandemic: Measures and Their Impact 1 Turkey’s Economy Amid the COVID-19 Pandemic: Measures and Their Impact Ali Rıza Güngen 1  Physical distancing measures, the implementation of which in early 2020, precipitated the Great Lockdown of spring 2020, had a dramatic impact on economies across the globe. After authorities acknowledged their inability to contain the pandemic, stock markets collapsed in several advanced capitalist countries. Government efforts to manage the pandemic and measures from central banks, particularly the US Fed, forced a revision of the doomsday predictions that have forecasted an economic collapse on a par with the Great Depression. Even so, 2020 is expected to end with a considerable contraction in global gross domestic product. 2  Turkey was still exiting the severe economic crisis of 2018-19, the effects of which lingered into early 2020, when it was hit hard by the COVID-19 pandemic. Public finances had already suffered a huge blow with the economic crisis, while many suffered further at the onset of the pandemic as the volume of government economic support and social expenditure remained minuscule compared to other countries. What is more, Turkey’s responses to the pandemic have sown the seeds of future problems which the country will have to reckon with in the medium to long term. After briefly evaluating the impact of the 2018-19 crisis, the study will analyse the economic slump and Turkey’s responses to the pandemic, underlining the insufficiency of the government’s measures to contain the long-term economic effects of the virus. The 2018-19 Crisis and the Pandemic Collapse 3  The change in global financial conditions after 2013 forced Turkish economic and financial actors to offer higher interest rates so as to maintain the pace of capital inflows. Despite efforts to hedge their risks, large capital groups struggled to access cheap sources of finance. Against this backdrop, the complications of the accumulation Analyses pluridisciplinaires sur la crise sanitaire COVID-19 en Turquie  Turkey’s Economy Amid the COVID-19 Pandemic: Measures and Their Impact 2 regime became increasingly visible. Two groups in particular suffered under the changing financial circumstances: The first was the Turkish corporate sector, especially energy firms, who earned revenues in liras but held debt mainly in foreign currencies. The second was small and medium-scale enterprises (SMEs), including those that provide intermediary goods to large capital groups. Such SMEs, which operate with small profit margins, had become accustomed to postponing their financing problems via state-sponsored cheap credit. 4  Turkey’s credit expansion ahead of a constitutional referendum in 2017 had increased the fragility of the economy even before the global financial tightening of 2018. By spring 2018, Turkey was suffering from high unemployment and huge current account deficits, while its growth rate had fallen to almost zero. Geopolitical tensions accelerated capital outflows, making it impossible to slow down the tempo of currency depreciation. During the first eight months of 2018, the TRY depreciated by a whopping forty percent against the US dollar. Policymakers had to increase the policy interest rate rapidly in September, which made a severe recession in the second half of 2018 all but inevitable. Following these interest rate increases, policymakers attempted to stimulate domestic demand by reducing tax ratios on particular goods, offering indebted households opportunities to restructure credit card debt and forcing banks and corporations to agree to renewed negotiations so as to increase the volume of restructured corporate debt. However, meaningful solutions to major problems, such as declining reserves, skyrocketing bad loans and higher unemployment rates, were merely postponed to the following year. In the end, the Turkish economy recorded almost no growth in 2019.1 5  Credit campaigns, which relied heavily on state banks, only managed to stave off economic contraction in 2019. Still, the changing global financial conditions, such as a rapid decline in interest rates from mid-2019 onwards, aided the monetary policy of the Erdoğan administration. Turkey’s monetary authorities also had success in ensuring currency stability in 2019, albeit at the cost of depleting the Central Bank’s reserves. The Central Bank of the Republic of Turkey (CB) started conducting swap operations on the Istanbul Stock Exchange, with lira-settled forward foreign exchange transactions compensating for the loss of reserves. Nevertheless, when these foreign exchange and off balance-sheet liabilities were subtracted, the CB’s net reserves were close to zero by May 2019 (more on CB reserves below). 6  The dwindling reserves meant that the CB lacked defences against currency attacks, something that explains the persistent pressure on the TRY despite relative currency stability in 2019. To make matters worse for the CB, foreign exchange deposits by residents exceeded 193 billion USD in 2019. It meant that more than half of the deposits in the banking sector were in foreign currencies at that time. With the CB running low on reserves and Turkish households choosing to hoard USD, the corporate sector busied itself by trying to pay off foreign exchange debts, making it harder to use resources for new investment. Turkey’s model, it seemed, faced a dead end, as the government also failed to stimulate the economy by making households borrow more. Despite declining interest rates in the second half of 2019, rates remained far too high for precarious low-income workers to increase their debts without major concerns. 7  In summary, the COVID-19 pandemic hit Turkey’s economy hard after two years of turbulence and exacerbated economic problems. Focusing on the 2018-19 crisis is important in two respects. First, the 2018-19 crisis, its legacy and the management of Analyses pluridisciplinaires sur la crise sanitaire COVID-19 en Turquie  Turkey’s Economy Amid the COVID-19 Pandemic: Measures and Their Impact 3 the crisis2 comprised the major reasons why Turkey experienced greater economic turbulence in spring 2020 compared to some major emerging markets. Turkey suffered from the biggest drop in employment3 in its history in those months, while the credit- led accumulation model underlies the country’s recurrent problems. Second, the management of the 2018-19 crisis (and, to some extent, the credit expansion campaigns of the post-2013 period) provided a blueprint for official responses during the pandemic. Due to the relative success of previous campaigns, Turkey has mainly responded to the COVID-19 collapse by expanding credit and offering extra loans to households and SMEs.4 8  After officially acknowledging the first COVID-19 case in the second week of March, the Erdoğan administration announced an Economic Stability Shield package and took its first economic measures. Partial lockdowns and social distancing measures, along with curfews in 31 provinces, in April and May precipitated a huge economic slump, the extent of which can be observed in Graph 1 below. The change in the uninterrupted line during the period t+7 shows the change in the second quarter of 2020, according to Turkstat data. It is striking that the 2018-19 crisis, despite its severity, resulted in a milder contraction compared to Turkey’s 2001 crisis and 2008-09 economic collapse. It should also be noted that the 2020 pandemic prevented the start of a new cycle in early 2020, despite the previous uses of public banks and state financial muscle following the 2018-19 crisis. Graph 1: Turkey's Economic Recessions in the 21st century Turkstat GDP data 9  In the main, state managers responded to the pandemic5 by delaying loan repayments, deferring social security premium payments, stabilising the TRY and providing cheap credits (to both households and distressed SMEs) to help them postpone their financial problems. The coming years will show whether the simultaneous pursuit of these goals, as well as the current management of the economic problems, will bring success. Analyses pluridisciplinaires sur la crise sanitaire COVID-19 en Turquie  Turkey’s Economy Amid the COVID-19 Pandemic: Measures and Their Impact 4 From Stability Shield to Credit Expansion 10  The Stability Shield Package which Turkey’s leaders announced on March 18, 2020, deferred loan repayments for shopkeepers for three months (later extended to six months), postponed social security premium payments in selected sectors and expanded the Credit Guarantee Fund limit to 50 billion TRY, among other measures. One surprising move was the cut in the ratio of value added tax on air travel. Business organisations explicitly helped prepare this first package, which comprised two main problems. First, there was an unrealistic assumption that Turkey’s economy was resilient enough to overcome the hurdles that accompanied the pandemic. Since there was no public discussion on the possible medium to long-term impact of such an economic slump, the measures were recycled from responses to past economic crises. Second, there was an over-reliance on state-sponsored credit expansion. Stemming from the crisis management practices of previous years, policymakers believed credit expansion would mitigate the slump and kick-start a rapid recovery, despite the questionable effects of this response during previous episodes of financial volatility and economic turbulence. 11  As of mid-September 2020, the number of COVID-19 patients in Turkey had exceeded 300,000, while the death toll had reached 7,500. During the first six months of the pandemic, the economic impact was most dramatic in April and May. Turkey ‘reopenedʼ its economy in June, a move that will compensate somewhat for the quarterly GDP decline of 9.9 percent in the third quarter of 2020. At first sight, the V- shaped economic recovery confirms the initial economic policy response, yet the Turkish economy still suffers from structural problems due to the way it is integrated into the world economy. Furthermore, it is not possible for Turkey to extricate itself from its slump without suffering additional impact to future economic activity. Not only has the pandemic swept across the global south and north, its cost continues to increase and expose the vulnerabilities of those countries, like Turkey, which occupies the lower echelons of the international division of labour. 12  Turkey’s economic growth relies heavily on capital inflows and easy access to new sources of finance. Due to dependent financialisation, global financial conditions will continue to have a strong impact on Turkish economic activity. In the first four months of 2020, capital outflows from the global south exceeded the levels of outflows during the 2008-09 international financial crisis. In response, monetary authorities resorted to the CB’s reserves. According to the balance of payments statistics, Turkish reserves declined by 31 billion USD in the first seven months of 2020. During the first few months of the pandemic, the negative impact of physical distancing measures in some sectors was intensified by capital outflows. In equity markets, meanwhile, capital outflows exceeded 3 billion USD from March to July. During the same period, 11 billion USD exited Turkish bond markets. In the near future, it is safe to expect new rounds of corporate debt restructuring that will resemble those of 2018-19. Turkish corporations were mainly net debt payers in 2018-19, and the capital outflows during the pandemic have made it harder for corporations to roll over debt. Still, from March to July, banks and private sector corporations repaid 12 billion USD in loans. Ultimately, though, it was only monetary expansion and credit campaigns that averted bankruptcies. 13  As a result of the capital outflows and the economic slump, expectations turned negative in summer 2020. In fact, the only reason the official unemployment rate did Analyses pluridisciplinaires sur la crise sanitaire COVID-19 en Turquie  Turkey’s Economy Amid the COVID-19 Pandemic: Measures and Their Impact 5 not reach its highest level in history was short-term allowance payments, which placed more than 3 million workers in an employment grey zone during the first months of the pandemic. Still, more than 10 million workers were unemployed, not seeking a job but ready to start, seasonally employed or underemployed in April-May 2020. In those months, the labour force population also dropped below 30 million. 14  Under these circumstances, the insufficiency of the economic measures became more evident. Lacking sufficient fiscal space due to the 2018-19 economic crisis, the government followed up its Stability Shield Package by extending new credits to corporations and households alike. According to official figures, more than 5 million households received one-time cash payments of 1,000 TRY per household (140 USD at the time). The insufficient cash assistance was topped up with supportive loans. From 1 April 2020, until the reopening of the economy in mid-June, almost 7 million individuals applied for basic needs credit (with limits up to 10,000 TRY). Data from the Banks Association of Turkey suggest that 1.8 million individuals with no history of consumer credit use applied for loans in the first two months of the pandemic. 15  This response was not limited to consumer credits. According to the Treasury and Finance Ministry, public banks extended cheap credit to 180,000 SMEs and 1.1 million shopkeepers. The dramatic rise in the credit volume in Turkey in April and May was achieved partly with contributions from the Credit Guarantee Fund (CGF), through which the Turkish Treasury assumed part of the counterparty risk. The CGF-supported credit doubled in volume during the pandemic, reaching 330 billion TRY. This credit expansion, which was of historic proportions, was mainly shouldered by public banks. 6 Reprising their actions in the post-2013 period, public banks helped delay some of the economic problems with cheap credits and restructurings. The Turkey Wealth Fund’s capital injection of 21 billion TRY in May increased the ratio of the TWF’s public bank shares and simultaneously ensured the smoothness of state-sponsored credit expansion. Analyses pluridisciplinaires sur la crise sanitaire COVID-19 en Turquie  Turkey’s Economy Amid the COVID-19 Pandemic: Measures and Their Impact 6 Table 1: Summary of Public Bank Actions Amid the COVID-19 Pandemic (March-July 2020) Ministry of Treasury and Finance, Bank websites 16  The table above presents a summary of public bank actions from March to July 2020. Although we do not have data on the volume of credit expansion stemming from specific campaigns, such as ‘Nefesʼ credits or the support package, we can suggest that the volume of state-sponsored expansion surpassed the campaigns of previous years. Despite this significant difference, a striking similarity with the post-2013 campaigns remains. The state-sponsored credit campaigns, first and foremost, targeted SMEs and the stimulation of short-term booms in housing and tourism amid the pandemic has also been a prominent objective. 17  The Banking Regulation and Supervision Agency’s (BRSA) active ratio regulation also pushed private banks to join the credit expansion. Since private banks used a loophole in the first regulation to fulfil requirements by investing in bonds, the BRSA revised the calculation in May. Despite this change in regulations, it was mainly the public banks which provided credit during the first months of the pandemic. The volume of the loans extended by public banks reached 1.1 trillion TRY in July 2020, surpassing the total combined loans of private and foreign banks. From March to mid-June, the TRY credit volume of public banks increased by thirty-two percent. During the same period, the increase in the TRY credit volume totalled seventeen percent for private banks and eighteen percent for foreign lenders. The credit frenzy continued until August, when the ratio of yearly total credit expansion reached forty percent. 18  As a result of the Erdoğan administration’s political discourse and rhetorical animosity to high interest rates, Turkey’s policy rate is not a meaningful indicator for understanding interest rates. Rather, the weighted average cost of funding provided by the CB is more useful for understanding changes in actual interest rates. In June, this average cost started to increase for the first time since early 2020. The end of the credit frenzy, which has been accompanied by rising interest rates, will eventually reduce the tempo of credit expansion. Ultimately, the political economic developments of late Analyses pluridisciplinaires sur la crise sanitaire COVID-19 en Turquie  Turkey’s Economy Amid the COVID-19 Pandemic: Measures and Their Impact 7 2020, as well as global financial conditions, will be the most important determinants of Turkey’s short-term economic performance. 19  The aforementioned credit expansion should be analysed through the lens of the limited support that policymakers have provided to households in general. According to the IMF COVID-19 policy tracker, the Turkish government provided around 498 TRY of support during the first four months of the pandemic (officials revised it to 573 billion TRY in September). The Ministry of Treasury and Finance announced the size of the Economic Stability Shield Package as 600 billion TRY in late May (adding an unknown multiplier effect to boost the number). Our calculations, however, show that the support provided by the Turkish government, including the credit support, was only around 300 billion TRY in the first four months of the pandemic. 20  By mid-September, policymakers highlighted in the New Economic Programme (2021-23) that COVID-19 support (for the first six months of pandemic) was in total, 494 billion TRY. The actual volume of the measures in the package was 267.4 billion TRY in credit support, 6.2 billion TRY in social assistance, 18.7 billion TRY in short-term allowance payments, 3.6 billion TRY in unemployment benefits, 6.4 billion TRY in cash assistance and social support, 69.4 billion TRY in deferred premium payments and tax deferrals, and 122.3 billion TRY in credit restructuring. Given the importance of credit support in the total financial support, it is necessary to underline that Turkish policymakers preferred to manage the economic slump by extending new credit to SMEs and encouraging workers and low-income households to borrow more. Foreign Exchange Interventions and Borrowing 21  In early 2020, Turkish authorities were confident the negative impact of the 2018-19 crisis would soon be over. The economic slump initiated by the pandemic put an end to such rhetoric in Ankara, which soon began warning of “new challenges” and a “new normal.” Indeed, one of the Turkish economy’s biggest challenges revolves around the value of the domestic currency, an issue that also dogged the period after 2013. 22  In September 2020, the real effective exchange rate hit its lowest point in 26 years (there is no data available from before 1994). The TRY’s depreciation will not necessarily boost competitiveness due to the dependent structure of Turkey’s economy. Since the massive depreciation in 2018, Turkish policymakers have tried to slow down the tempo of depreciation. In defending the TRY and the CB not only had to maintain high interest rates but also become creative. Back in August 2018, the BRSA squeezed the international swap market in an effort to make it harder for market players to sell the TRY short. While trying to deepen the domestic currency swap market on the Istanbul Stock Exchange, the CB also tried to compensate for the loss of international reserves. After the 2016 coup attempt, the CB had already begun conducting money swaps to meet the short-term liquidity needs of domestic banks. In spring 2019, however, the volume of swaps increased tremendously, while the CB recorded the borrowed USD as assets. 23  According to the CB’s metadata from the institution’s website, the bank’s borrowing, accounted as short positions comprised the “liabilities, followed on off-balance sheet.” These, “arise from the [CB’s] financial derivatives activities (forwards, futures and swap) with resident banks and non-resident banks and the CB’s foreign exchange deposits against Turkish lira deposits auctions.” The bank stabilised its net reserves in Analyses pluridisciplinaires sur la crise sanitaire COVID-19 en Turquie  Turkey’s Economy Amid the COVID-19 Pandemic: Measures and Their Impact 8 spring 2019 by counting these borrowed dollars as part of its net reserves. The problem with this move is that these liabilities will become dollars owed by the CB when they mature. In the CB’s defence, the other factor of these money swaps are CB assets. However, since they are denominated in TRY, adding these swaps to its international reserves as if they are denominated in USD is controversial. If we exclude the borrowed USD, the CB’s real reserves have remained considerably lower than officially declared throughout the year and have even declined to previously unseen levels during the pandemic. 24  The circulation mechanism, which is akin to a fictitious perpetual motion machine, succeeded in providing TRY liquidity to domestic banks and FX liquidity to market players, while maintaining relative calm for Turkey’s currency during the second half of 2019. Alongside the currency swap mechanism, the CB and public banks’ market operations (which totalled a volume of 100 billion USD from early 2019 to mid-2020, according to Reuters estimates) helped lower the tempo of depreciation from the second half of 2019 on. 25  Policymakers continued to use this mechanism in 2020, with some modifications. In July and August, the Turkish Treasury borrowed heavily in domestic markets. Meanwhile, the issuance of debt instruments denominated in foreign exchange rapidly increased the public debt stock. Public banks were the main buyer of these new bonds, but they could only buy these instruments by using their assets and increasing their FX open positions. Using FX-denominated bonds, public banks remained key players in the existing swap mechanism, while the CB kept showing the net reserves at a higher rate thanks to off-balance sheet liabilities. 26  There were two main problems with these sorts of foreign exchange interventions and borrowing. First, the swaps and accumulated off-balance sheet liabilities continued to raise concerns about the CB’s capacity in the face of speculative attacks. Second, the rapid increase in Turkey’s public debt eroded the already-diminished fiscal space in due course. During the summer, the exit of foreign capital from Turkish financial markets continued, albeit at a milder level. The result, however, was once again a sharp depreciation in July and August. The TRY depreciated rapidly before the ʽsecond wave’ of the COVID-19 pandemic (see Graph 2 below). Analyses pluridisciplinaires sur la crise sanitaire COVID-19 en Turquie  Turkey’s Economy Amid the COVID-19 Pandemic: Measures and Their Impact 9 Graph 2: CPI based real effective exchange rate of Turkish Lira (2003=100) Central Bank of the Republic of Turkey 27  The tax revenues, as one would expect, declined in real terms between March and July 2020 when compared with the previous year. The 12-month budget deficit exceeded 195 billion TRY in July, while the 12-month primary budget deficit broke a new record with 174 billion TRY. The decline of central government revenues was tempered somewhat in August and September by delayed tax revenues stemming from a short-lived boom in the housing sector and stimulated consumption. Despite this uptick, the public borrowing requirement increased rapidly, and the Erdoğan administration decided to increase the annual borrowing limit it had already breached from 154 billion TRY to 310 billion TRY in the autumn. The foreign exchange interventions of summer 2020, which required the Treasury to borrow further foreign exchange, resulted in the increased share of FX debt in Turkey’s total debt stock. For the first time since 2003, the share of FX debt in total debt stock exceeded fifty percent. This is an indicator that currency depreciation is no longer a concern just centred on corporate debt but public debt as well, meaning policymakers ultimately had to increase the cost of funding. The Outlook for the Future 28  After Turkey’s financial liberalisation, the national economy’s path of integration into the world economy took the form of dependent financialisation. The growth of the economy under such circumstances has been heavily dependent on the monetary policy decisions of the central banks of core countries and the risk perceptions of the international financial community. Turkey’s economy drifted into a severe economic crisis in the post-2013 period. The depth and the timing of the 2018-19 crisis, however, stemmed mainly from the policy manoeuvres and responses of the country’s economic policymakers, who responded similarly during the pandemic. 29  This raises questions about Turkey’s economic future. It seems that the low interest rates in core countries and the depreciated domestic currency may not be enough to Analyses pluridisciplinaires sur la crise sanitaire COVID-19 en Turquie  Turkey’s Economy Amid the COVID-19 Pandemic: Measures and Their Impact 10 foster a sustainable recovery in Turkey. Since the country’s overriding response so far has been to extend credit and compel workers and low-income households to borrow, there appears little chance the Erdoğan administration will witness the post-pandemic recovery it expects. To be sure, Turkey may record growth rates close to its historic averages for a couple of years while maintaining the stability of domestic currency. Policymakers, however, also expect a recovery with relatively high growth rates in the medium to long term. Amid severely restricted fiscal space, insufficient CB reserves and a model of credit-led accumulation that is vulnerable to the long-term impacts of the pandemic and sudden changes in global financial conditions, Turkey’s economy cannot replicate the recovery it managed in the aftermath of the 2001 or 2008-09 crises. (Even then, it bears noting that those recoveries were also short-lived, as the first ended in 2007 and the second lasted just two to three years (until 2012) due to the reversal of capital flows). 30  By the beginning of the second wave, Turkey had three major problems as a result of the official interventions and responses analysed in this paper. First, deposit holders have perceived the FX interventions of the public banks and CB as signals to retain their savings in foreign exchange, thereby deepening the problems for the corporate sector. The insufficiency of the CB reserves may bring renewed pressures on TRY in the medium to long term. Second, the pandemic will have long-lasting impact on sectors, like tourism, which are of key importance for the Turkish economy. The decline of economic activity in the country’s trading partners will also have repercussions on Turkey’s economy in the years ahead. Last but not least, the method of crisis management itself relies on suppressing public debate and marginalising proposals that might lead to radical transformations. Locking Turkey’s economy into credit-led accumulation (the official response to both the 2018-19 crisis and the pandemic slump) eliminates the possibility of discussing the composition of public expenditures, new infrastructural investments and equity-based responses to economic volatility. 31  In the next 12 months, Turkey’s economy might achieve a better performance in terms of GDP growth. It might even avert a further fall in the TRY’s value while lowering the ratio of non-performing loans, depending on global financial conditions. There will, however, remain deep grievances due to the management of the challenges of recent years, including the pandemic. The loss of employment, the accumulation of debt and the decline in income for millions of households will have a dramatic impact not only on future economic expectations, but political and social struggles as well. NOTES 1. The latest GDP data shows that growth totalled only 0.9 during the year 2019. 2. The Erdoğan administration sought to reassure the international financial community by prescribing austerity amid high real interest rates in 2018. However, to prevent a long recession, policymakers increased public expenditures and relied on public banks to expand credit. Despite announcing an IMF-type austerity program, the Erdoğan administration itself breached the Analyses pluridisciplinaires sur la crise sanitaire COVID-19 en Turquie  Turkey’s Economy Amid the COVID-19 Pandemic: Measures and Their Impact 11 program in 2018-19. This form of contradictory management can also be described as the crisis of crisis management. 3. This study does not cover the loss of employment and unemployment statistics. For an analysis of labour market developments amid the pandemic, see Gürsel’s article in this volume. 4. See Güngen, A. R. (2020) ‘Turkey’s Financial Slide: Discipline by Credit in the last Decade of the AKP Rule’, Bedirhanoğlu, P. et al. eds., Turkey’s New Neoliberal State in the Making: Transformations in Legality, Economy and Coercion, London: Zed Books, pp. 118-133 and Akçay, Ü. and Güngen, A. R. (2019) ‘The Making of Turkey’s 2018-19 Economic Crisis’, Institute for International Political Economy Berlin, Working Paper, No. 120/2019. 5. This study covers the period until late summer 2020. By September, many countries had officially announced the beginning of the second wave of the pandemic. Likewise in Turkey, the number of deaths and patients started to increase. Despite economic normalisation, the surge in numbers may lead to previously unseen measures and result in partial or comprehensive lockdowns. 6. For a comprehensive analysis of public bank actions amid the pandemic, see Güngen (2020) ‘Turkey’s Public Banks Amid COVID-19’, McDonald, D.A., Marois, T., and Barrowclough, D.V. (Eds.) Public Banks and COVID-19: Combatting the Pandemic with Public Finance, Municipal Services Project (Kingston) and UNCTAD (Geneva), pp. 333-353. ABSTRACTS The COVID-19 pandemic hit Turkey’s economy hard after two years of turbulence and aggravated economic problems. Turkish policymakers preferred to manage the economic slump by extending new credit to small and medium-scale enterprises and making workers and low- income households borrow more. These responses have sown the seeds of the future problems which the country will have to reckon with in the medium to long term. This study analyses the economic slump in 2020 and Turkey’s responses to the pandemic, the use of public banks, the state-sponsored credit expansion and foreign exchange interventions before the beginning of the second wave in late 2020 and underlines the insufficiency of the government’s measures to contain the long-term economic effects of the virus. AUTHOR ALI RIZA GÜNGEN Ali Rıza Güngen is a political scientist and visiting assistant professor at York University, Canada. Dr. Güngen’s research currently focuses on dependent financialisation, financial inclusion, and sovereign debt management across the global South and public banks. His articles appeared in The Journal of Peasant Studies and New Political Economy. He co-edited the 2019 book The Political Economy of Financial Transformation in Turkey, published by Routledge, and is the co-author of Financialisation, Debt Crisis and Collapse: The Future of Global Capitalism (in Turkish, 3 rd edition, Istanbul: Notabene, 2019). Analyses pluridisciplinaires sur la crise sanitaire COVID-19 en Turquie