Erdogan’s economic policy may have worked, but may not be sustainable
ALBAWABA – Three-time Turkey President Recep Tayyip Erdogan is slated to announce his new cabinet by the end of the week, as investors and traders hold their breath on his promise to bring in a team with “international credibility” to manage the nation’s finances.
According to Bloomberg, the most significant candidate for a ministerial appointment is former finance minister Mehmet Simsek.
For the better part of a year, Erdogan has been pushing what Bloomberg previously described as “unorthodox” economic and financial policies.
To the president, back then, it seemed like the only way to tackle inflation; cut borrowing costs and grow the economy, the New York-based news outlet explained.
Naturally, Turkey's economy grew 5.6 percent last year, one of the fastest rates in the Group of 20.
But inflation hit 86 percent last year, as well, and the central bank kept cutting interest rates.
Since the beginning of 2023, prices are rising at half that pace, but inflation is still higher than any other G-20 country, except for Argentina, Bloomberg reported.
The Turkish Lira continued to fluctuate for weeks before the elections until it finally slipped to a record low after Erdogan won the runoff on Sunday.
To bolster the Lira, the central bank has been burning through the country’s foreign currency reserves, with more than $200 billion in debt payments coming up soon, Bloomberg reported.
3-time president Erdogan likely to remain in charge of Turkey’s economy
Nonetheless, “despite the economic challenges faced by Turkey, Erdogan is unlikely to delegate responsibilities and soften his highly personalized style of rule,” said Anthony Skinner, head of research at global advice firm Marlow Global.
“He may appoint one or two senior officials who are palatable to the markets, but it is clear who will continue calling the shots,” Skinner said.
But Simsek, a former Merrill Lynch strategist, has asked for the autonomy that would allow him to put the country’s finances back on track, as per Bloomberg’s sources.
Yet, it is unclear whether or not he intends to get back into politics.
Erdogan and Simsek met in Ankara on Monday, but Simsek, who joined the president on the campaign trail earlier in the month, said he wasn’t seeking a return to “active politics,” according to Bloomberg.
Meanwhile, the current president’s grip on the economy was cemented with the constitutional overhaul of 2017.
Turkey, under Erdogan, no longer has a prime minister, and central bank governors and finance ministers are appointed and dismissed by the president.
So far, Turkey has relied heavily on Russian and Arab Gulf investments to prop up the lira, Ozgur Unluhisarcikli told Bloomberg, Turkish head of the German Marshall Fund of the United States.
Nearly $130 billion worth of foreign investments left Turkey last year, the news media said.
The biggest challenge at the moment facing Erdogan is to keep Russian and Gulf money flowing into the country, despite the massive exodus of foreign funds in 2022.
