Turkey's labor market overcomes effects of pandemic: C.Bank

Head of Turkish Central Bank says reserves rose by $30B thanks to steps such as swap agreements

Ugur Aslanhan and Fatma Eda Topcu   | 28.09.2021
Turkey's labor market overcomes effects of pandemic: C.Bank


Turkey's labor market has largely overcome the impact of the coronavirus pandemic thanks to tourism and the re-opening of the services sector, the country's Central Bank head said on Tuesday.

Speaking at a finance event in the metropolis Istanbul, Sahap Kavcioglu stressed that the main economic figures in the country were positive in 2021.

Noting that Turkey and China were the only G20 countries able to grow their GDP in 2020, he said the positive outlook in the first half of 2021 remained.

Exports continue to contribute to the GDP growth, with figures signaling recovery in the labor market, he noted.

"As a result, we see that non-agricultural employment started to recover primarily with the contribution of the industrial sector and reached pre-pandemic levels at the beginning of 2021 despite the limited contribution from the service sector," he said.

"Finally, we can say that the labor market has largely overcome the effects of the pandemic period, with the contribution of the service sector and tourism."

Worse than 2008 crisis

Kavcioglu said economic policies during the pandemic could be evaluated in two periods, with the first involving an unprecedented standstill amid worldwide lockdowns.

In this period, central banks and other policy makers took several steps to prevent employment losses, company bankruptcies, and provide progression for financial markets, he stressed.

In the second period, which is currently ongoing, recovery trends have accelerated but global production is still unable meet demand growth and global inflation has increased due to rising commodity prices, he explained.

The difficulty caused by the pandemic has exceeded that of the 2008 financial crisis for the global economy, and its effects are more pronounced and permanent due to the supply shocks, he underlined.

Kavcioglu recalled that all central banks took expansionary policy measures, cutting interest rates and boosting asset purchases and credit support programs.

The first move of central banks in both advanced and developing countries facing the crisis was to decrease interest rates without hesitation, he added.

They made much more funding available via repo to ease access to liquidity, said Kavcioglu.

Turkey's was one of the central banks that decreased policy rates, he noted, adding that its financial policies were aimed at protecting the structure of the financial sector and ensuring that credit flows continued to the private sector.

Touching on the Turkish Central Bank's reserves, which have recovered recently after a drop last year, he said: "Our reserves increased by $30 billion to reach the level of $120 billion from the levels of $85-90 billion."

"Swap agreements, rediscount credits, gold purchases, and required reserve steps were the main contributors of this increase," said the Central Bank governor.

*Writing by Gokhan Ergocun

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