Mismanagement stands out in Turkey’s fragile economy
It would not be an exaggeration to say the Turkish economy has recently experienced its most fragile period in the past 13 years. The worst part is that while the fragility in economic balances is increasing, examples of bad management are also increasing daily.
We have already entered a period that will increase Turkey’s fragility, along with all developing countries. This process, stemming from global economic trends, has actually been expected for a while, so preparations should have been made. But they were not.
As fragility increased, currency has lost the most during this period. In other words, we are negatively different from all other there was no room for any mistakes to be made. However, grave mistakes have started to be made.
As a result of all this, the dollar exchange rate exceeded 2.5 Turkish Liras at the beginning of the week. While the upward trend of interest rates continued, the uneasiness of the markets also climbed. The constant fall in growth rates is another factor fueling the unease.
If domestic mistakes had not been made, would the rise in the exchange rate be the same?
The answer to this is “absolutely not,” because we can see a similar course in Russia, which is in a deep crisis. We are at the top of the list of developing countries, which alone reveals the dimension of our own mistakes.
If Turkey had prepared for this expected period, it would have used a portion of the foreign currency inflow to increase its reserves. Not making any preparations to further reinvigorate the economy is an example of bad mismanagement.
OK, we have reached this stage and there is no more room for mistakes. But now a very basic mistake has been made: The independence of the Central Bank and tight money policy were made into a target by the government.
The person who has done this is President Tayyip Erdoğan, who has moved up to a higher (though non-accountable) position, but who acts as if he is the head of the executive body and the person who cabinet ministers obey more than the prime minister.
He used to criticize the Central Bank’s policies and interest rates, but now the boundaries have been totally violated. He has openly said that he wants a presidential system, while also implying that in this system the Central Bank, which he sees as the source of all problems, will not be independent. His power over the executive is apparent, and when we look at his future plans, because he will be the person to continue his influence regardless of any system, the markets have become very uneasy. The dollar exchange rate, which was on an upward trend, went off the rails with the start of this discourse. But nevertheless, Erdoğan said, “The Central Bank will find the remedy for the dollar exchange rate; we will see how it succeeds.” In other words, he increased the pressure to lower the interest rates and alarmed the Central Bank. He made it issue uncertain statements and then when the dollar went off the rails because of his attitude he tried to say, “This isn’t my responsibility, it’s the responsibility of the Central Bank.”
Indeed, in getting alarmed and by issuing uncertain statements, the Central Bank is also at fault.
Everyone should ask themselves these questions: Will any investors put their money into a country where the independence of the Central Bank is openly threatened? And if money does not come, who is responsible for this?