Policy Suggestions Against Economic Impact of Pandemic

Fiscal policy measures taken against the pandemic have had a rapid response at the global level (Alberola 2020). Additional expenditures and forgone public revenues in Turkey are $ 2 billion, corresponding to 0.2% of national income.

The general opinion in times of crisis is that fiscal policies give effective results compared to monetary policies. In fiscal policy, which can be applied under two main headings as public expenditures and tax incentives, tax reductions have more positive results in developed countries while public expenditures have more positive results in developing countries (Ustaoglu 2020).

In his fiscal multiplier analysis on Turkey, Ustaogjlu (2020) stated that giving priority to public spending in times of crises would be more effective than some policies such as tax reductions, postponements, deferrals, etc. In their fiscal multi­plier analysis on Turkey, Sen and Kaya (2017) also demonstrated that the multiplier effect of public expenditures on GDP is higher than that of taxes. Although transfer expenditures have a less Keynesian effect than public consumption expenditures on the public expenditures side, they emphasized that, any type of public expenditures are more effective in promoting the economy than taxes.

Turkey has followed a similar path with other countries, in this period, in the area of fiscal policy. An important shortcoming of the supports such as tax deferrals, social security premium and loan payments and short-time working allowance is that it could not provide direct income support to employees and SMEs who lost their jobs or were deprived of income flow due to the pandemic (Qakmakli et al.

The most comprehensive study on the economic effects of direct transfer expen­ditures in the current period is made by Voyvoda and Yeldan (2020). The Labour Income Support Package is designed in this study which uses the general balance model. In this package, supporting the labour income of households and providing direct income support are examined. Technique of the package is; income transfer of up to 50% of their income to formal wage earners, supporting SMEs and free­lancers and increasing the public consumption expenditures by 20%. As a result, it is suggested that a package of 123.5 billion TL provides a 60% gain in GDP relative to the possible impact of the COVID-19 pandemic. At the same time, it is stated that this package will reduce the budget deficit under COVID-19 in the public sector by half and stimulate the sectors producing intermediate and investment goods.

Considering that labour-intensive sectors and small businesses are affected from the COVID-19 measures more than the sectors that create added value, supports such as income supports and minimum working time should be provided without restric­tions; income transfers to people with income and job losses should be increased. In this process, the payment ceilings of short-time working allowance and unem­ployment insurances provided to those who lost their jobs should be increased, and additional income transfers should be offered to retirees and low-income families (Taymaz 2020; Yiikseler 2020).

During the pandemic, new business models were adopted, flexible and remote working became widespread, and digitalization gained speed. An analysis demon­strated that the business lines operating through e-commerce were less adversely affected by the pandemic. The non-digitalized business lines have assumed a heavy burden (Deloitte 2020b).

In order for SMEs to adapt to the remote working model and digitalization, a “Digital Enterprise Support Platform” should be created, and the government should reduce adaptation costs and support the process.

Another effect of the pandemic is the debate on shifting the production to countries other than China as a result of the reactions against China. Considering its proximity to G-20 economies and large markets, high labour supply, low labour costs, high quality and safe production, Turkey has the opportunity to turn the crisis into oppor­tunity in the medium term. However, the opportunities may not be used as effective when taken into account the private sector’s indebtedness and financing challenges in Turkey. New solutions and international collaborations are needed in this period. Yet, government spending can also be used to support exports and the private sector (TUBA 2020).

In order not to increase the debt burden of the enterprises considering their existing loans, it should be considered to delay loan payments again, when neces­sary. Additional measures and cash supports should be provided for the continuity of employment in SMEs (Taymaz 2020).

VAT and insurance premium payments dates which are postponed especially for the tourism sector may be extended again considering that businesses will face payment difficulties due to the stagnant summer season in 2020 compared to previous years (Ya§ar 2020).

Again, the conditions for benefiting from short-work allowance for those working in the tourism sector should be stretched. In short-time working applications made with the effect of COVID-19, it is required to have paid 450 days of premium in the last 3 years (I§kur 2020), as subject to the service contract in the last 60 days of. The seasonal nature of the employees of the tourism sector, which provides an annual input of $40 billion, and the fact that the tourism season has not started at the peak of the pandemic, make it difficult for those working in this sector to benefit from short-time working allowance. The conditions for benefiting from short-work allowance for those working in the tourism sector should be revised (Ya§ar 2020).

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