Turkey with high economic collapse

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The Great Vortex of the Middle East,
Ardavan Amir-Aslani and Inès Belkheiri

The Turkish president sticks to his policies implemented in the name of Turkey’s “economic independence”, but the Turkish lira loses almost 45% of its value to the dollar in a year and falls into an inflation spiral. ing.

Destiny seems to be defeating Turkey. Pandemic worsens Turkey’s economic situation after a deadly flood affecting the western Black Sea and an underwater explosion in the Sea of ​​Marmara due to global warming after a fire that destroyed the country’s south coast in the summer of 2021 I was allowed to.

“Even before the pandemic hit the world, Turkey was already in crisis, on the verge of recession due to the sharp fall in the Turkish lira, huge debt and creeping inflation.”

But even before the pandemic hit the whole world, Turkey, led by President Recep Tayyip Erdogan’s brilliant hands, is already in crisis, recession due to the sharp fall of the Turkish lira and huge debt. Was on the verge of crisis. And rampant inflation.

Power over the central bank

Despite the deteriorating economic situation, the Turkish president, contrary to the advice of the majority of economists, insisted on keeping interest rates low despite rising inflation. He specifically evoked Islamic lessons banning usury to justify his unpopular choices. Following the Turkish President’s wishes, the Central Bank of Turkey, whose mission is to set interest rates and monitor inflation in particular, cut key interest rates by 5 points in four months, with the Turkish lira plunging each time. Also. The dismissal of the three governors of the Central Bank of Turkey since July 2019 and the frequent change of finance ministers since July 2018 have shown seize of power over the institution. In addition to voluntarily maintaining low interest rates, the Turkish President was able to supplement the depreciation of Lira’s bank deposits against the dollar by using public funds. Therefore, as of the end of December 2021, the state’s net reserves had fallen from $ 12.2 billion to $ 8.6 billion in a week. Opponents claim that Turkey will soon run out of cash at this rate.

“The Turkish president, contrary to the advice of the majority of economists, was keen to keep interest rates low despite rising inflation. He especially justified his unpopular choice. In order to make it, it evoked the lesson of Islam that bans usury. “

The facts are there as a result of these contrarian political choices. Inflation surged to 36% in a year, the highest since September 2002. Meanwhile, electricity has officially boosted inflation by about 21% in a year. The decline of lira, the soaring prices of daily necessities, and even energy, the Turks felt a dramatic decline in their standard of living. In addition, pandemics are impacting the economy as income and exports decline sharply. Fearing weakened economic fluctuations, foreign capital also fled all at once. Therefore, the economy should shrink by 4% this year.

Purpose: Compete with China

Nevertheless, the president seems to want to maintain the course with his desire to focus on growth and focus on investment, production and exports that may compete with China. Thus President Erdogan raised his minimum wage by 50% on January 1, 2022. This will disappear significantly due to the deterioration of economic conditions. In addition, the growth rate in 2021 was 7.4% (up 33% in 2021), mainly due to low cost exports. He recently declared that thanks to the reforms implemented, the Turks would succeed in “liberating the Turkish economy from its chain and liberating Turkey’s democracy from leadership.” However, Tüsiad, a major employer’s organization representing 85% of exporters, called on the President of Turkey to “return to the economic principles established within the framework of a market economy.” Not only the Turkish people, but the business world.

“The president seems to want to keep the course by focusing on growth and his desire to bet on investment, production and exports that may compete with China.”

This economic bleeding has also begun to seriously threaten the unwavering power of the Turkish President for 19 years. The key to Erdogan’s success so far has certainly been to convince him of his ability to lead the country to prosperity. Eighteen months before the presidential election, opposition parties have called for the election to move forward, justifying this request by the fact that official inflation is seven times the government’s target.

Reconciliation between United Arab Emirates and Armenia

Given Turkey’s economic difficulties, Ankara set aside historic political disputes with the UAE due to Turkey’s proximity to the Muslim Brotherhood, which the UAE considers a threat to regional security. It seems that he is devoted to generating new income. Armenian genocide not officially recognized by Ankara.

“Eighteen months before the presidential election, opposition parties are calling for an advance in the election, justifying this request by the fact that official inflation is seven times the government’s target.”

As part of that, Ankara criticized Abu Dhabi for supporting the failed 2016 coup attempt in Turkey and not being on the same line in the Libyan conflict. But last November, President Erdogan and the Crown Prince of Abu Dhabi took a step forward and signed several investment and cooperation agreements. For example, the United Arab Emirates will raise $ 10 billion to support Turkey’s health and energy-related investments. For Turkey and Armenia, they have promised to normalize bilateral relations.