(Adds postponement of VAT payments, Grand Bazaar closure)
By Can Sezer and Nevzat Devranoglu
ISTANBUL, March 23 (Reuters) - The Turkish lira slipped 0.8% on Monday to its lowest level since September 2018, as a surge in domestic coronavirus cases set the stage for a potentially sharp economic slowdown spanning tourism, manufacturing and the vast services sector.
The lira stood at 6.5985 against the dollar by 1323 GMT, weakening from 6.5480 on Friday and was set for a sixth slide in the last eight trading days. It has lost 10% so far this year, nearly matching losses in a volatile 2019.
As of Sunday, Turkey’s death toll from the coronavirus had reached 30, with 1,236 confirmed cases. Turkey has suspended flights to some 70 countries, closed schools, cafes and bars, banned mass prayers and postponed sports matches and events.
With most Turks staying at home to help curb the outbreak, the strong growth of the last few months looks set to cool quickly, as automakers temporarily shut their factories and banks eased payment rules on loans.
Finance Minister Berat Albayrak said on Monday that VAT payments due on March 26 had been postponed till April 24.
“The global flight from risk and flow towards the dollar is very strong due to coronavirus. We too cannot determine where this will end,” one forex trader said, noting some other emerging-market currencies had logged twice the lira’s losses.
“The public sector’s dollar supply and oil prices have been instrumental in this,” the trader added.
A currency crisis that peaked in August 2018 pushed the Turkish economy into recession, but it recovered strongly in the latter part of last year. In total the lira lost 36% of its value in the previous two years.
Lenders including Ziraat Bank, Vakifbank, Halkbank and Isbank announced some flexible loan payment options and some offered possible restructuring for corporate debt, especially to the hard-hit tourism and transportation sectors.
The lira, which weakened as far as 6.6075, recovered some losses after the U.S. Federal Reserve mounted an extraordinary new array of programs to offset what it called “severe disruptions” to the economy caused by the virus.
Turkey’s main share index recovered some of the day’s losses after the Fed move and was down 1.11%, while the banking index was 4.3% weaker.
The consumer confidence index rose to a still-depressed 58.2 points in March, while foreign arrivals for February rose by 4.46%, official data showed.
Turkish Airlines shares fell 2.6% after it said on Sunday that 85% of its passenger planes were not being used.
The airline - which says it flies to more destinations than any other carrier - will halt all its international flights as of March 27 except those to Hong Kong, Moscow, Addis Ababa, New York and Washington.
The automotive industry, which accounts for a fifth of Turkey’s export revenue, was also hit as several large manufacturers halted production for two weeks because of supply disruptions and market conditions.
Among them were Ford Motor Co’s commercial vehicle hub Ford Otosan, Toyota’s SUV plant and CNH Industrial’s tractor plant Turk Traktor.
Turkish auto parts producers association TAYSAD saw a 20% decrease in exports as their biggest clients in Europe halted factories, with 80% of members slowing manufacturing this week.
Istanbul’s historic Grand Bazaar also shut on Monday as part of the measures to contain the spread of coronavirus, broadcaster NTV said.
Additional reporting by Ezgi Erkoyun and Daren Butler; Editing by Jonathan Spicer and Gareth Jones