Political effect on economic decisions

Political effect on economic decisions

The political process that started with the Dec. 17 graft operation continues to affect the economy negatively. The political clash that is defined domestically as a “state crisis” has increased the uneasiness both in domestic and international investors. More than that, the appearance of the effects of this political clash in economic decisions made for companies and individuals aggravated this uneasiness.

We can say this effect is two-way. The government is claiming that in these operations, launched by the segment it calls a “parallel state,” companies that have undertaken the major infrastructure projects have been targeted. Based on this, it is trying to make the public adopt the argument of “This is the game of those internal and external focal points that do not want Turkey to advance.” In other words, it is suggesting that to wear down the government, certain segments within the state want to harm businessmen who are close to the government. Consequently, by using these arguments it is trying to create an impression that actually there have been no corruption and bribery.

On the other hand though, those arguments have intensified recently and suggest those businessmen and companies that do not act as if they are close to the government have been exposed to penalties intentionally all along. While it is said a resource issue has been created recently intentionally for a bank known to be close to the community and tax auditing has been tightened for companies, these rumors have intensified after Dec. 17.

Besides, some transcripts of phone conversations have started circulating relating to some big groups getting closer to the community during this recent era. Up to now, these big groups have never been mentioned as being close to the community.

After this, the fact that new and major penalties have started arriving to these big groups that have already been exposed to constant taxes and fines for some time, has been interpreted as “the government has increased punishment for some businessmen.”

Refraining from looking weak

The government, which has worn down due to the recent incidents, is observed to exert a special effort to “avoid looking weak.” Some businessmen agree the recent re-increase of penalties means a message to the entire business world. They think the government, with this way, is trying to maintain the perception that “it has not been worn down; it is still strong” and prove it is still powerful.

One of the important aspects here is while similar penalties were imposed in the past, foreigners did not take them into consideration too much; however, the executive body’s recent decisions that are threatening democracy and freedom of expression are now also visible to foreigners. Consequently, pressures directed toward the domestic business world and the political decisions made in the economy now began to catch the eyes of foreign investors.

Besides that, it is also observed that in monetary policy decisions, such as the interest rate increase, the government is obstructing what needs to be done because of the effect of elections.

Meanwhile, an important aspect that is forgotten is external sources are needed for the Turkish economy to grow and foreigners are now monitoring these developments very closely. The effect of the abstaining stance foreigners have adopted against Turkey is certain in the recent extreme foreign exchange rate movements. It should not be forgotten that political decisions in economy threaten Turkey’s macroeconomic equilibrium.