Political statements raise concerns for Turkish economy

Statements made by top government figures are raising concerns about the health of the Turkish economy.

The latest such statement was made by government spokesperson Bekir Bozdağ, speaking after a cabinet meeting on Nov. 20 about interest rates and the Central Bank.

Bozdağ noted that lowering interest rates had its own rules within itself. “It does not create positive results when the Central Bank and the others in the sector continue as usual concerning interest rates,” he said.

The markets, however, did not understand why Bozdağ spoke about these technical issues, as they had not been discussed in that day’s cabinet meeting.

The markets also listened with anxiety to the latest statements by President Recep Tayyip Erdoğan, which formed the basis of Bozdağ’s statements, over the weekend, during which the president heavily criticized the Central Bank and its interest rate policies.

But the bankers with whom I spoke after that speech did not pay too much attention to these statements. They said these kinds of statements focusing on interest rates are often made but the government never puts radical steps into practice.

As a result, the markets do not believe in the options presented in these statements regarding interest rates.

On the other hand, even though people do not expect to hear any big decisions, everybody is waiting for the meeting due to be held this week, in which the prime minister will talk about interest rates.

In fact, the official statements that have been fueling discomfort in the markets are not limited to interest rates. In particular, the official statements regarding the cases against Reza Zarrab in the U.S. on charges of breaching sanctions on Iran will only serve to work against Turkey.

When officials claim that a big, dark plot is being staged against Turkey and the economy, and when they say things like “we are prepared, nothing can happen to us,” they create an even bigger discomfort.

The markets know that these statements are motivated by domestic politics. But it is clear that this atmosphere creates an environment that affects the economy in a very negative way.

On the one hand, official statements seek to rule out persistent rumors that there are big fines coming for a number of banks. But when regulatory changes are pushed through showing changes to the principles of bank transfers, the markets get stressed once again.

The huge insult recently made against Turkey during a NATO drill in Norway, and our reaction to the insult, is another factor creating doubts in the markets, as onlookers worry about the country’s stability and security.

Markets do not pay too much attention to interest rate announcements in Turkey any more. But they do start to worry when they see signals that show us moving away from the West.

It is clear that we have entered a period in which domestic and foreign policies and the economy will all affect each other significantly in Turkey. And sadly it cannot be said that political developments are going very well at present.