Worried about Turkey’s economic turmoil


January 10, 2022

Turkey is currently facing a major economic crisis and the future of the country’s economy is uncertain. Faced with the significant social consequences of this crisis, Prime Minister Erdogan stands as Chief Economist to resolve it. What is the cause of this crisis? Can the situation get worse? The latest information with Didier Billion, Deputy Director of IRIS.

Turkey is experiencing an economic crisis and inflation is competing. How did the country fall into this situation? Who are the main victims?

Macroeconomic indicators are certainly very worrisome in recent months. According to official figures, inflation in 2021 will be 36%, which is more than seven times the government’s target. Most of this situation is explained by the Turkish lira’s fall of nearly 45% against the dollar during the same period, which automatically leads to higher import costs.Beyond the dryness of the numbers, we need to understand the rise in prices of basic necessities (52% to 120% of electricity from the consumption quota announced in 1).er The end of the month is especially complicated for some of the most unfavorable social categories and middle classes, with 25% of natural gas consumed at home, 86% of oil and 54% of bread in January. At the same time, the official unemployment rate remains at around 15% of the active population, which many Turkish economists consider to be very underestimated.

This situation is the result of both structural problems and short-term difficulties, and the two levels may be intertwined. As far as structural parameters are concerned, there are basically three. First, Turkey is totally dependent on hydrocarbon imports. Hydrocarbon raw materials are a major component of economic weakness due to price volatility in the global market. The second is related to the dependence of the Turkish economy on foreign direct investment (FDI). That’s a significant reduction from about $ 19 billion in 2007 to just $ 550 million in 2020. This situation is, of course, explained as follows: Sensitive to foreign investors’ hesitation due to the country’s political situation and excess freedom, especially since the 2016 illegal coup. Finally, the third is a country that mentions the structure of Turkey’s economy, which has the characteristics of middle-income, and is struggling to move into the category of high-income countries. To do this, management must show its willingness to make the necessary long-term decisions, especially in the area of ​​training. For example, industrial production to increase the number of engineers and technicians who have the potential to increase the market share of the product.

You mentioned about economic issues, but what is it? Are the announcements of the steps taken by the Turkish President to fight the economic crisis sufficient, or do they constitute a ploy?

Claiming President Erdogan to be the country’s chief economist is certainly a factor that exacerbates the difficulties. He shows that the Minister of Finance and the Minister of Finance change twice a year and he is hesitant about the steps to be taken at the top of national institutions. The repeated dismissal of central bank executives can be explained in the same way. Recep Tayyip Erdogan’s stubbornness, which believes that central bank cuts in interest rates are a panacea to overcome the current crisis, has created strong resistance and opposition.

The establishment of the President of the Republic’s Economic Policy Committee, consisting of about 10 experts in October 2018, puts all decisions, including economic decisions, in the hands of one man and his very close friends. Complete the system. This also means that typical examples of neoliberal regulation of the economy, especially strong employer organizations such as the Turkish Businessmen and Businessmen Association (TÜSIAD), are downplaying their role. increase. Therefore, when the latter criticizes current economic policy, it is immediately sharply rebuked by the Turkish President and the media supported by it, creating jobs, ensuring growth, and not dare to attack in particular. The government advised to be content with itself.

Turkey’s president tends to blame officials, followed by supermarket managers, dark forces who want to harm Turkey, interest rate lobbying does not constitute policy and aims to avoid his own responsibilities It is said that.

In this sense, the December 20th presidential announcement on support for the Turkish lira will allow the value of certain Turkish lira bank deposits to be linked to the dollar rate in the future. Savings partially compensate citizens who are victims of a weaker pound, but even if it allows a significant rise in the pound against the dollar, it makes it possible to address structural challenges. Do not configure short-term measures. Erdogan Prime Minister Ali Babajan, a former AKP economic minister who is currently opposed, explained that if the exchange rate fell temporarily, this would be explained by a large amount of foreign currency exchange by the central bank during the presidential intervention. There is. Not because of his speech.

“God will be happy and inflation will fall as soon as possible”: How to analyze Prime Minister Erdogan’s speech? What is the reaction from opposition and national economists?

It is correct to mention the religious references that Recep Tayyip Erdogan uses more and more to stop the economic crisis. Reminding the Quran’s lesson on the rate of hurt is actually of little use in solving the current difficulties, but rather a matter of magical thinking.

Some Turkish economists, TÜSIAD, what remains in trade unions, and of course opposition to parliament, blame their instability, and above all, their inefficiencies in solving current challenges. By doing so, he continues to criticize the government’s decisions.

The situation is very important for political opposition to Recep Tayyip Erdogan. Presidential and legislative elections should theoretically be organized in the spring of 2023, and polls and polls reveal that support for the president and his party, the Justice and Development Party (AKP), is collapsing. is. Part of his social and electoral foundation, which Prime Minister Erdogan integrated thanks to the very good economic achievements of 10 years ago, is especially among the middle class, who have benefited from the remarkable economic development of the past. It is being significantly eroded. This process was embodied especially in the spring 2019 local elections. In this election, the two largest cities, Istanbul and Ankara, were won by the main opposition, the Republican People’s Party (CHP).

But Recep Tayyip Erdogan is an amazing reaction politician, and if it’s dangerous to make accurate election predictions about the upcoming political deadline, this match seems complicated for him. Of course, this depends on economic development in the coming weeks and months and the ability of opposition parties to unite and propose credible mobilization alternatives.