A cabinet where Turkey’s economic balance is protected
When the new government’s cabinet was announced on May 24, it looked like the names on the list were selected to maintain equilibriums. In particular, keeping Mehmet Şimşek as a deputy prime minister showed that market demands were at least partly considered.
This balance was welcomed by markets. Following the release of the names of ministers, exchange rates slightly dropped.
As well as Şimşek, another name who was close to ex-prime minister Ahmet Davutoğlu, Lütfü Elvan, was appointed to the Ministry of Development, which also pleased the markets. These names, signaling that the mentality of the Justice and Development Party’s (AKP) previous economic management would be maintained, gave a positive message to the markets.
However, some time has to pass to be able to see what the new government will do regarding the economy.
It is known that Nurettin Canikli, who has been appointed as a deputy prime minister, and Nihat Zeybekci, who has been re-appointed as economy minister, represent a very different economic mentality to Şimşek and Elvan. Before being able to see which mentality will come to dominate in the cabinet, we will need to monitor the government’s practices for a while.
Despite this, the fact that sensitivity was shown to markets while forming the cabinet generates hope for the future.
Energy Minister Berat Albayrak, who was mentioned as a possible deputy prime minister in charge of the economy, was instead kept in his post as energy minister, which also points to the care paid to market concerns.
Other ministerial appointments in other economy fields, especially Naci Ağbal keeping his position as finance minister, were welcomed in terms of fiscal discipline. For example, keeping the incumbent agriculture minister and customs minister in their positions was welcomed by the business world. The fact that Ahmet Aslan, who was appointed as the new transportation minister, has been a close colleague of Yıldırım, is a development showing that Yıldırım’s effect in infrastructure investments will continue.
The importance of fiscal discipline
When we evaluate the new cabinet in terms of the economy, we can see that President Erdoğan and Prime Minister Yıldırım are aware of the delicate balances that have to be maintained. It looks like a cabinet has been formed to protect these balances and avoid any sharp movements in the economy.
Let’s hope that this precision will also be shown in the government’s practices. If it is not, in this period when the global finance system is not favorable to developing countries like us, the Turkish economy will not be able to sustain major mistakes.
The critical point here is that investor mentality does not disrupt macroeconomic balances. If there is a deterioration in Turkey’s fiscal discipline, at a time when exchange rates are increasing and inflation remains high, then there is a danger that the economy will derail. So let’s hope the balances are maintained in economic practices.