The Impact of Pandemic on GDP Growth Rate, FDI and Export: A Case Study of Turkey

Abstract

It has been two years since the outbreak of Covid 19, and we still live with the pandemic. No one knows when the pandemic will finish and how long it will take until all is back to normal and the global economy fully recovers from the pandemic. Undoubtedly, the Corona crisis has had devastating effects on the global economy. The global GDP decreased by 3.5%, the global FDIs were below $ 1 trillion for the first time in the last 20 years in 2020, falling 35% compared to 2019, and the global trade dropped 5.3% at the same time. The main objective of this paper is to discover the impact of a pandemic on the Turkish economy, or more precisely, on the Turkish GDP growth rate, FDI inflows, and export. To get the most reliable results, a multiple regression analysis has been conducted, using the contemporary economic software EViews 12. World Pandemic Uncertainty Index (WPUI) that was introduced by the International Monetary Fund (IMF) in 2020 was used as a measure of the uncertainty caused by the pandemic. For the robustness of the analysis, World Uncertainty Index (WUI), which measures the overall uncertainty caused by the economic and political factors, was also included. The data about GDP growth rate and export were provided from the World Bank Database, while the data for the FDI inflows from UNCTAD. Different independent variables were used in the research for each dependent variable (GDP growth rate, FDI inflows, and export). The research has shown that Covid 19 pandemic has a significant negative impact on the Turkish GDP growth rate (if we consider a 5% level of significance) and on the Turkish export (if we consider a 10% marginal level of significance). However, the regression analysis has shown that the pandemic has a positive but insignificant impact on FDI inflows to Turkey. The study will be a great benefit for further analysis of the impact of Covid 19 on economies as it is one of the first empirical studies that analyzes the effect of Covid 19 on a specific economy.

Received: 16 March 2022 / Accepted: 12 May 2022 / Published: 5 July 2022