Economic course depends on growth, cabinet reshuffle

On one hand, there is the increase in economic fragility; on the other, there is the presidential election to be held based on the new administrative system. The government will have to decide on its economy policy amid this controversy.  

The cabinet reshuffle has reportedly been postponed because of the Qatar crisis, but at the same time, it is also rumored that President Recep Tayyip Erdoğan has not yet determined his preferences politically and economically. Ministers have been asked to present road maps at the end of June, thus providing time before the options are decided. Erdoğan is expected to clarify his decision in foreign politics and the economy during this time before the presentation of the new road map and the cabinet reshuffle.

From Nuray Babacan’s story in Hürriyet on Saturday, we understand that the preferences to be made are being discussed. Deputy Prime Minister Mehmet Şimşek made a detailed presentation in the last cabinet meeting, but with interventions from Erdoğan and other ministers, the presentation took a long time.  

Cabinet ministers have been asked to present 180-day plans, then 365-day plans and then 300-day plans, bringing us up to the elections. They are being asked to prioritize investments that will influence citizens in the short term and postpone public investments that are not urgent. This is important information in terms of the economy. This information may be the indication that the government is starting to keep its feet on the ground in terms of the course of the economy.   

However, from the story we have learnt that a consensus has not been reached on the current account deficit and high rates. At the same time, the role of low growth in the public’s discontent and the negative effects on small businesses were also discussed. In other words, it seems high growth will again be preferred to win the elections.    

Anyone who monitors the economy closely can easily point out which cabinet ministers prefer excessive growth and which cabinet ministers prefer a balanced course. Because of this, it is very important which ministers will be in charge of the economy in the cabinet reshuffle expected to be done in July. 

If these three-phase plans are based on excessive growth, then people like Ali Babacan and Mehmet Şimşek should not be expected to have a place in the cabinet; even if they do, they should not be expected to be effective. If Erdoğan is going to take steps for 4 percent growth, let go of the insistence on interest rates and opt for normalization starting with the lifting of state of emergency. Then these ministers can do business in the cabinet. However, I don’t think that will happen.

On the other hand, if he will opt for the continuation of the current political and economic course and maybe further accelerate them, then names like Nurettin Canikli will have more say in the government. If excessive growth is preferred and being sympathetic to the markets is chosen, then there will not be a need to make major changes in the current economic administration.

I think, regardless of all of this, the direction of the Qatar crisis, relations with the United States and the European Union and surprises in the global economic system could determine the course of politics and the economy. However, Erdoğan’s decision on growth and his choices for ministerial positions will give important clues about the economic course.