January 17, 2006

Bird flu spares Turkish economy but not poultry industry

Bird flu is unlikely to have a huge impact on Turkey's booming economy in the near future, but failure to control it could put the country's tourism industry into jeopardy and endanger its balance of payments, economists said.

Turkey's economy has been rebounding from the 2001 financial crisis, with annual growth hitting eight percent and inflation under control at less than 10 percent. Despite bird flu, economists say there are no immediate threats to this rosy picture. The International Monetary Fund said last week that the outbreak of bird flu is unlikely to affect the country's US$10 billion reserves.

However, a spokesman added that IMF is watching the situation closely. Turkey's wide current account deficit, which is about 6 percent of its GDP, is a point of concern. If bird flu becomes a serious problem, Turkey will have a problem with balance of payments, say analysts. However, analysts also say it can expect assistance from the European Union or the World Bank if the outbreak becomes exorbitantly costly.

The main Istanbul stock index was at a record high on Monday reflecting optimism over Turkey's economic prospects. However poultry firms lost ground and were down 4 percent on average.

Business in the egg and poultry sector has shrunk by 50 percent as people stopped eating white meat and eggs. Price of eggs have fallen 40 percent while poultry sales have dropped by 70 percent since bird flu was reported in humans, according to Kemal Akman, head of the union of poultry producers. With the carnage in the industry, many poultry companies will go bankrupt and industry sources say Turkey's poultry sector could halve in size by the end of 2006.

The US$2.5 billion turnover poultry sector is hard-hit as people switch to fish and red meat since the bird flu outbreak. Some 764,000 poultry have been culled in Turkey, according to the National Coordination Centre, leading to a loss of about US$30 million a month. Turkey's government has started compensation to people whose poultry were culled.

Meanwhile, there has been another case of infection in Eastern Turkey, raising to 19 the number of people who contracted the virus, including three who died, the centre said.