The impact of Covid-19 on Turkey’s non-recoverable economic sectors compensating with falling crude oil prices: A computable general equilibrium analysis

Abstract

Human beings face unprecedented Covid-19 pandemic outbreak since the beginning of 2020. This disease started to change economic, social, and individual conventional behaviors. Several economic activities have sharply declined, and demand for commodities is decreasing, such as oil. This commodity has also suffered from disagreement among Organization of Petroleum Exporting Countries (OPEC)+ members to deal with the amount of cutting oil production. This situation adds a supply-side problem into declining demand due to Covid-19. Turkey, as an emerging economy, highly depends on imported oil and suffers from this pandemic disease. This study aims to analyze the compensating role of falling oil prices for impacts of Covid-19 on non-recoverable sectors in Turkey, e.g. tourism, travel, and transportation. The main argument in the study, that is falling prices in oil can contribute to compensation for losing revenue from tourism, travel, and transport. Throughout the study, ORANI-G as a multisectoral computable general equilibrium model is employed. Three scenarios, namely Scenario-1, 2A, and 2B, are set to analyze the effects of falling oil prices as compensation for Covid-19 in the selected sectors. Results show that Covid-19 decreases gross domestic product by 1.16 but falling oil prices as 25 and 50% compensate for this decrease by 0.72 and 1.56% gross domestic product increases, respectively. It is concluded that through the falling oil prices, Turkey’s dependence on crude oil imports might provide a new reparation to overcome non-recoverable impacts. This study is scoped with selected sectors and falling oil prices. Other economic and social sectors need to be investigated in terms of challenges of Covid-19 and opportunities for declining crude oil prices. Besides, competitiveness based on the scale of firms and the ability to access business finance should be analyzed within the changing business model in the post-coronavirus period.

The risk spillover effect of the COVID-19 pandemic on energy sector: Evidence from China

“…Moreover, investors' future expectations have been generally pessimistic in the context of COVID-19, and their investment strategies have altered accordingly ( Mazur et al, 2021 ; Wen et al, 2021 ). In particular, since the COVID-19 is steadily worsening the demand and disrupting energy supply, the energy market, especially the crude oil market, is full of uncertainties and fluctuation, resulting in huge negative shocks for the energy and stock markets ( Aydın and Ari, 2020 , Štifanić et al, 2020 ). Thus, additional evidence shows that the COVID-19 is associated with lower stock returns and heighted stock volatility in energy market, and the risk contagion between energy and stock markets has significantly increased during the COVID-19.…”

Research on the impact of COVID-19 on Chinese small and medium-sized enterprises: Evidence from Beijing

“…Until the end of 2020, the cumulative number of confirmed cases worldwide has reached 91.5 million, and the cumulative death toll has reached 1.96 million. It has seriously affected the lives and health of people around the world and changed the daily routine of the public and society [ 1 ]. For instance, loss of small and medium-sized enterprises (SMEs) is particularly severe: According to the report of the China Association of Small and Medium Enterprises, there has been a reduction in business income of nearly 67.69% of SMEs; 21.61% of SMEs cannot repay loans and other debts in time, facing greater pressure on operating funds; 86.22% of SMEs cannot survive on funds in their accounts for more than 3 months; 33.73% of SMEs do not have enough funds to survive for one month.…”

Impact of Global Changes of the Pandemic Crisis on Business Models of Transport Companies

“…If we talk about the change in the gravity of world commodity markets, then it should be noted that a significant decrease in freight traffic due to a decrease in demand for raw materials. Considering the results of the analysis of the compensating role of the fall in oil prices for the impact of the epidemiological situation on the non-renewable transport sectors of the economy, carried out by L. Aydin and I. Ari [23], we find confirmation that the determining factor that affects the business model of freight transport by rail is the displacement of volumes and nomenclature of cargo flows.…”