Incentives not effective unless stability and confidence provided
The Justice and Development Party (AKP) government, following the failed coup attempt, has brought up economic stimuli again. In arrangements issued one after the other, the aim is to revive the economy and facilitate an investment climate once more.
The industrial production data for the month of June announced at the beginning of the week has revealed a serious drop. While a similar trend is also expected in July, we will have an economically stagnant period ahead, including September, when there will be a long holiday. The rushed incentives of the government are not expected to yield any results before October at the earliest. It is doubtful whether or not all of these will, in the remaining portion of the year, help production recover and exceed the estimated 3 percent growth.
Fiscal measures are also being taken: For instance, the housing administration, TOKİ, is lowering mortgage rates and extending time, aiming to revive the construction sector to increase growth. Also, again in a risky way, pressures have increased on the banks to lower their credit interest rates, especially their mortgage rates.
Well, will all of these help the economy recover? In my opinion, regardless of how many stimuli are offered, they will not suffice to revive economic activities to the desired level unless stability is instituted and confidence is again provided to the markets, especially to Western capital.
When political stability and confidence are mentioned, it entails a wide economic field that includes the elimination of concerns among representatives of domestic capital, encouragement to foreign capital, as well as renewed spending by the public.
The stance of the West after the failed coup has demonstrated that the government has lost a lot of confidence due to all of its mistakes and that even when it is right, it has difficulty persuading the foreign public. They want to see concrete steps showing commitment to democracy, starting with human rights and freedom of the press. At the same time, open initiatives are expected to demonstrate that we can act with the West. For this, the Kurdish issue and fighting the Islamic State of Iraq and the Levant (ISIL) are the priorities of the West.
The death penalty and the economy
The president and members of the cabinet frequently voice accusations that the West was involved in the coup attempt and that adequate support was not offered after the attempt. Even this discourse is straining relations.
Meanwhile, moves such as the cancelation of the EU refugee deal and the convergence with Russia make one think that because there is no confidence left, Turkey is breaking away from its main ally, the West, or even NATO…
The president’s recurrent mention of “The people want it; let the parliament decide. I would approve the death penalty” has created a huge reaction from the West. Criticisms have increased given that this would result in a definite break with the EU.
As can be seen, developments that would affect stability and confidence, including the death penalty debate, are closely related to the economy because Turkey needs foreign capital to grow, and capital needs stability and confidence.