Turkey, Economy

Turkey: Government keeps economy on track amid COVID-19

With measures in place to stem virus' spread, govt introduced relief packages to shore up households, all sectors of economy

Deniz Cicek   | 11.03.2021
Turkey: Government keeps economy on track amid COVID-19

ANKARA 

In the year since Turkey confirmed its first official case of COVID-19, the government's relief package became a lifeline for every sector of the nation’s economy, from households to businesses.

As the pandemic fist began spreading beyond China to become a global threat, its impact on the economy became a hot topic in Turkey, especially in March 2020.

That month the government announced a relief package to help companies cope with the economic fallout of the virus, including debt deferment, tax cuts for businesses, and help for low-income households, the retired, and the elderly.

While some of these measures have remained in place uninterrupted, some were suspended and later reintroduced as case numbers climbed again at the beginning of winter.

The government also threw a lifeline to the accommodation and transportation sectors, which were hit hardest by the virus, such as cutting value-added tax (VAT) for airlines to 1% and postponing taxes for accommodation facilities.

Starting last December, the tax payments of taxpayers who have temporarily suspended their activities due to the pandemic measures were postponed.

The country introduced steep VAT cuts for services and a withholding tax reduction for tradesmen at the end of July 2020, a measure set to be valid through this May 31.

The VAT in accommodation and catering services and cultural activities such as cinema, theater, and museum entrance fees was cut from 8% to 1%, and was slashed in passenger transportation, wedding organizations, residential maintenance and repair, dry cleaning, and tradesmen services such as tailoring from 18% to 8%.

The VAT for education services was also reduced to 1%, valid until June 30.

Relief on loans, taxes, salaries

Taxes, premium debts, administrative fines and Treasury receivables were restructured with installments.

Lenders also postponed principal and interest repayments of firms facing cash flow disruptions, and provided additional financing support.

State lenders announced a low-interest credit package of up to 10,000 Turkish liras ($1,477) for families with monthly incomes under 5,000 Turkish liras ($740).

The country introduced a Stock Financing Support Package to help Turkish exporters whose stocks accumulated due to low demand and canceled orders.

In another measure to bolster liquidity, the government doubled the limit of the Credit Guarantee Fund.

The country's banking watchdog provided flexibility for late loan repayments by companies.

The government also announced that it would pay 60% of the staff salaries of firms forced out of business under the short-term employment allowance program.

To help shield retirees from the outbreak's negative effects, the minimum pension was raised to 1,500 Turkish liras ($221), with bonus payments moved to earlier dates.

The government also started providing 4.4 million families in need with 1,000 Turkish liras ($148).

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