Century of Türkiye begins with economic collapse

Türkiye entered a new path after the casting of votes last month. Turkiye’s Erdogan has emerged the clear winner of the presidential election.

Regarding the economic issue, many experts expect a return to economic orthodoxy, where Erdogan should give the Central Bank a say in the future as the ‘interest cause-inflation effect’-based monetary policy implemented under President Recep Tayyip Erdoğan and the escalating inflation, combined with the effect of the 6 February earthquakes, made the economy the number one priority in the new period called Century of Turkiye.

According to the data of the Turkish Statistical Institute (TUIK), inflation exceeded 12 percent in the first three months of the year. Annual inflation was 50.51 percent according to TUIK and 112.51 percent according to the Inflation Research Group (ENAG). Inflation figures are deeply felt in the bazaar and the market. The kilogram price of meat exceeded 300 TL, and cheese exceeded 200 TL. The price of onions reached 30 liras. In addition to the expensiveness of food, prices in all expenditures such as clothing, health and education are out of control. The housing crisis has deepened due to increases in rent and house prices.

Relatedly, the Turkish Lira has lost nearly 340 per cent against the US dollar, from 3 liras to 20 liras during the five years of the President’s last term, and inflation is running at more than 50 per cent.  The Lira weakened another 1 per cent earlier this week to 20.31 per dollar.

Will foreign investors come back?

While the rule of law is a very important requirement for financial investors when deciding to invest, it is a “must have” for strategic investors.  However, especially in the last 5 years, there have been events that negatively affected the investment enthusiasm of both strategic and financial investors. As an example of these events, We can say that the government could not replace Mehmet Şimşek, the Minister of Finance of the time, respected by foreign investors, with an alternative with similar qualifications in the eyes of investors, and of course, the negative results of the coup attempt in 2016.

On the other hand, the qualified work force is very important for serious foreign investor. Universities’ international publications need to be transformed into patents, and patents into industrial products, and reflected in high-tech export figures. If Turkey turns into a center for global education and international companies at master and doctorate level, its economic growth will double in 5 years, and the country will be among the top 10 world giant economies in 10 years at the latest.

Türkiye allocates 15.3 billion dollars for research and development and the Netherlands 16.5 billion dollars. The Netherlands is 11th in the world, producing nearly 35,000 patents, 3 times more than Turkiye do, with an annual revenue of 101.2 billion dollars with high technology exports. Turkey fell behind even Malaysia and Israel and ranked 37th with 5.7 billion dollars. Turkey’s high technology exports, which were 1.1 billion dollars in 2000, increased to 5.7 billion dollars in 2021. China increased its revenue from $41.7 billion to $942 billion on the same dates.

To sum up, the newly elected government has two main challenges. The first one is to flatten the curve of inflation and to balance the trade deficit budget because Turkey exported $250 billion last year, and imported more than $360 billion, there is a deficit of $110. 

It is time to focus on what Turkiye “should not do” rather than what it “should” do. We cannot continue to hide the truth about statistical or any other data from the world and the Turkish people. This is a “must have”, and it will be a good start to tell the truth in every situation, without exception and unconditionally. Second, Turkiye must stop using the legal system as a tool to achieve a goal, breaking the law, and changing it when it’s not in their favour. These make the rule of law in Turkey controversial, and it is unrealistic to expect strategic foreign investors to return before the debate is over.

Image Credit: AP Photo/Francisco Seco

Tags : Turkey