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Turkey Special March 2020

Turkey: Government announces fiscal aid package in response to coronavirus fallout

The government announced a TRY 100 billion (around 2% of GDP) fiscal support package on 18 March to contain the negative impact of the Covid-19 pandemic on the economy. The government stated that these measures will be financed internally in principle; however, it did not exclude other sources of financing if needed. More stimulus and other steps could be taken if and when needed, Finance Minister Albayrak stated.

Social security premiums and VAT will be delayed for six months for sectors such as retail, shopping malls, automotive and logistics, and the VAT on domestic air travel will be reduced for three months from 18.0% to 1.0%. Moreover, companies with cash flow problems will be exempt from repaying their debt for three months, with additional financial support ready if needed. Exporting firms, meanwhile, can receive inventory financing to maintain capacity utilization rates, which should protect employment in export-oriented sectors, while employees whose companies have had to halt temporarily activity will receive income support. Additionally, the credit guarantee fund will be doubled in size to 50 billion lira to provide support to SMEs and non-SMEs without sufficient collateral to obtain credit from banks.

The fiscal aid package came days after the Central Bank announced its own supportive measures for the economy. Taken together, this should alleviate some of the burdens imposed by the viral outbreak but is unlikely to completely offset the impact.

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