Shops close across Turkey, dimming hopes of a boom year

ISTANBUL/ANKARA (Reuters) – Shops closed across Turkey on Thursday to help halt the coronavirus spread, dimming the economy’s prospects and raising questions for hundreds of thousands of workers after Ankara pledged $15 billion in support and advised Turks to stay home.

Clothing retailers shuttered and malls, with some 530,000 employees and annual turnover of $160 billion, were set to follow suit after Turkey announced cases of the virus had nearly doubled to 191 including a second death.

A day after President Tayyip Erdogan announced a series of steps to backstop the economy, two sources said government officials are in the early stages of trimming private expectations for economic growth, which was publicly forecast to be 5% this year.

A drop in unemployment from above 12% last month to below 9% by year end is now seen as unlikely, while public spending is expected to be a bigger-than-expected driver for the major emerging market economy, they said, requesting anonymity.

However Turkish Finance Minister Berat Albayrak said in a TV interview on Thursday he has “no concerns” about meeting the government’s growth, budget and inflation targets in 2020.

Turkey – which had just recovered from a recession last year – has taken steps in the last week to rein in the coronavirus spread, closing cafes, banning mass prayers and halting flights to 20 countries.

The worldwide effects of the highly contagious respiratory illness, including mass quarantines and travel restrictions, have raised prospects of a severe global recession that would slam Turkey’s tourism and export sectors.

On Wednesday Erdogan called on people to minimize social contact until the virus threat recedes, but he did not tell them to stay away from work as he announced a 100 billion lira ($15.40 billion) economic support package.

Ankara is eyeing potential measures beyond those announced by Erdogan, including on taxes and unemployment insurance, which could be taken in the future, the two sources told Reuters.

“There are several steps that are being worked on and these could be implemented step by step when necessary” after a re-evaluation in April, said one of the sources.

The lira was 0.9% weaker against the dollar on Thursday – hitting its weakest level since the depths of a currency crisis in September 2018 – and bringing its losses this year close to 10%. It shed 36% in the last two years.

The head of Turkey’s United Brands Association, which represents 384 brands and 70,000 domestic stores, told Reuters store sales had dropped 70% in the past week due to the virus and companies cannot make up for them. Online sales infrastructure was insufficient, added Sinan Oncel.

‘SHARP’ CONTRACTION

Retailers including listed companies Mavi Giyim and Vakko Tekstil said they were closing retail stores. Mavi shares dropped 4.7% and Vakko fell 3.5%.

Mavi said its priority was the health and safety of staff and customers as it closed stores in Turkey, Germany and Canada, adding that its online stores would remain open.

The AYD shopping centres’ association said its board recommended that malls shut and it was awaiting instructions from authorities. “None of our employees will lose their work and (the situation of) our tenants will be eased as necessary,” said the AYD, which says Turkey has 435 malls.

After meeting ministers and business leaders, Erdogan said on Wednesday Turkey would postpone debt payments and reduce the tax burden on some sectors. “None of our citizens must leave their homes or get into contact with anyone, unless absolutely necessary, until the threat disappears,” he said.

Among specific measures, Erdogan said Turkey’s tourism accommodation tax was being suspended until November to support the key tourism sector, which accounts for some 12% of the economy. Debt repayments of companies affected by the coronavirus will be postponed for a minimum of three months.

Jason Tuvey, senior emerging markets economist at Capital Economics, said Turkey’s containment measures “will lead to severe disruptions to economic activity” and cause the economy to “contract sharply” in the second quarter.

On Tuesday, Turkey’s central bank cut its key interest rate by 100 basis points at an earlier-than-scheduled policy meeting.

On Thursday, luxury goods chain Vakko said it was temporarily halting production activities and shutting stores. Others announcing closures included Boyner, Ipekyol and Marks & Spencer stores in Turkey, operated by Fiba Retail.