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Will Turkey’s snap elections recover the future of Economy?

Erdogan Government, having managed to get through every election ever since the year 2002 until today as the leading party, has never been in such a complicated position from the economic point of view.

The 2008 global crisis, originating from the USA, naturally caused the economic depression, but none of the enterprises or banks went bankrupt because of it. Despite such a negative state of economics in that period, Erdogan had gotten through the 2009 election with the vote rate of approximately %38.8.

Currently “Erdogan’s AKP” is literally under the rolling ice mass; nevertheless, due to lack of strong opposition, it is almost clear that again, it will get through this year’s election as the leading party if there would be no miracle. However, due to the change in the election system, the person to choose the President will have to get more than %50 of the votes. That is why the situation is now harder than ever for Mr. Erdogan. The parties “MHP” and “BBP” had formed the state alliance. The current polls show the vote rate will hardly reach %50.

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Turkey’s military operation held in Afrin got a huge public support; moreover, from the start it raised the vote rate. However, the coming casualty news and the huge warm-up of the economy seems to have had driven those raises back. A number of very significant headlines came up indicating the increasing uncertainty caused by the spoiled relations with the USA and EU.

Now let us try to see, in which economic position Turkey approaches the election.

  1. Turkey’s rank in the credit rating institutions, that form international perception of Turkey’s economy, has decreased significantly. Moreover, it has gotten into a position lower than that of the country not to be invested in. Naturally, if the risk rate of a country raises, the interest rates for the international debts of the country also raise. For that reason, Mr. Erdogan has declared a war to those institutions. Moreover, he stated that the local rating institution will be formed despite the economists ridiculed the news.
  2. Currently, the weakest point of Turkey’s economy is its external national debt of about $ 435 billion. In the year 2018, the $250 billion part of it has to be converted. Together with the risk of war and due to decrease of the economic image, the country has been forced to the point where it is obliged to close those debts at the highest interest rates.
  3. Unemployment Rate ascended to more than %10. Especially the ascent of unemployment of youth takes place.
  4. The instrument most trusted by the Government are growth rates. In the year 2018, the economic growth was %7.4. That is a huge rate, but it was unable to result in neither suppressing the inflation and decreasing the unemployment nor reducing the fever at the currency market. For the real sector, that growth went invisible.
  1. Fighting the inflation may have been the field in which the 16-year government of “AKP” had the biggest success. But after the decrease to approximately %5, currently the inflation had risen to about %12. And there are no signals of the rise coming.
  2. Being related to inflation, interest rates have risen. The Government used to insist on keeping the interest rates at a low level, but when it became clear that it leads to losing the international funding, the Government was forced to steadily
  3. Raise the interest rates. Currently the rates are approximately %12.3.
  4. Currency exchange rates have become the biggest trouble for “AKP”. The currency situation affects every citizen, on the other hand, the enterprises willing to close their debts are accumulating foreign currency from the market in order to fill the opened positions. And this, at the same time, constantly increases the fever at the currency market. Especially, some days ago, in order to raise the hot money flow, the interest rates were again elevated at about %0.75.

In this picture, that we show you from the top view, Turkey had made the unexpected decision for the early election to be held. The proposals having no place in the international system, such as gold trade, are coming directly from the President. Approaches of a strange kind, such as wealth tax or fixation of the exchange, generally applied in the closed economies, are being discussed. As far as we know, panic results in making mistakes. We will see what happens, after the election.

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