Conclusion

The public health measures taken in the fight against the pandemic have required temporary closure of some businesses and workplaces or the reduction of existing capacity by disabling vital and essential links of the supply chain.

Turkey got caught by such period with economic problems aggravated over the past few years. Struggling with the exchange rate shock since 2018 high hopes of reducing the current account deficit encountered by the pandemic obstacle in Turkey. Production declined in manufacturing sectors such as automotive, textile and white goods, which have a considerable share in export revenues. Again, tourism revenues, which would greatly contribute to the reduction of the current account deficit, fell sharply upon the restriction of international circulation.

The fiscal space of the government is narrowing in Turkey which had a primary deficit in 2019, for the first time for many years, due to; the increase in debt stock, upward trend in dollarization, high credit risk premiums, decrease in public revenues, increased public spending due to the pandemic.

The narrow fiscal space in developing countries, including Turkey, increasing financing costs of spending and the difficulties in accessing external financing possi­bilities restrict fiscal stimulus packages and transfer expenditures (Alberola et al. 2020).

Supports implemented to overcome the crisis were offered mainly through credit channels in Turkey. The domestic demand supported growth strategy included in the medium-term programme was tried to be maintained during the pandemic.

The most critical dilemma of the measures taken through credit channels is the uncertainty of the duration of pandemic. The inability to generate income and pay the loan debts in the maturity period increases the default risk of economic agents. For the private sector, which is currently under high debt, the results of loan financing support may differ according to the pace of the economic recovery and slow recovery may result in the non-convertibility of operating debt.

The same risk also applies to the households. Despite the layoff bans and short­time working allowances during the pandemic, supporting 60% of the gross wage by the state reduces the purchasing power of the people. The minimum living stan­dards of the individuals whose disposable incomes are reduced are endangered. Therefore, depending on the course and severity of the crisis, direct income support and additional cash aid-weighted additional transfer expenditure packages should be made available by the government. Projections on unemployment also support this argument.

In addition, the presentation of supply-side transfer expenditures is critical in maintaining the level of economic growth, employment and output in the long run. Considering the fact that the countries are refraining from manufacturing based in China and they search for new centres, Turkey can convert the crisis into an opportunity by reflecting the high exchange rate in lower labour costs, in terms of filling the vacant production place. With its strong stance, particularly, in health care, textile, installation industry and durable goods, Turkey can achieve an economic success, in this period, by meeting the need for protective products and equipment for health personnel, masks and ventilators around the world. This policy should be strengthened with new business lines in the long term; they should be supported with tax exemptions, exceptions, reductions, etc. for international collaborations and direct investments.

New support packages should be developed for the financial sustainability of sectors with high export shares in the manufacturing sector. The decrease in the export revenues of the domestically produced automobile industry can be compensated by stimulating domestic demand with excise duty reduction and replacing the revenue increases in this area.

Construction made the fastest recovery among the sectors. As a result of the attractive design of the loan packages, mortgaged housing sales had historical heights. Tourism and civil aviation, where care is taken to provide support, did not made the expected improvement due to the lack of international demand.

Enterprises in the entertainment sector are still closed as part of health measures against pandemic. Demand continues to decline in the food services, entertainment, culture, arts and sports sectors. The ongoing uncertainty and health risks are delaying the recovery process of the sectors. Following supports can be provided; post­poning loan debt payments of the sector employees and business owners, increasing short-time working allowance supports, postponing the submission dates of tax declarations.

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Yaprak Karadajg Duymazlar Research Assistant in Department of Public Finance, Izmir Katip Celebi University, Turkey. Studies Ph.D. in Public Finance and Financial Management; holds M. Sc. in Public Finance and Financial Management, BS in Public Finance and Economics. She has articles and book chapters about public expenditures, economic crises and local governments.