Troubled air in Turkish economy here to stay

Troubled air in Turkish economy here to stay

The troubled air that has been felt for some time in the economy is not dispersing. While the biggest and most essential issue in the economy seems to be slowing growth, the depressed business world is not cheering up.  

Growth rates started falling long before, but the failed July 15 coup attempt complicated the situation further. The business world has felt a chill from the state of emergency adopted after July 15. While individuals and companies loyal to the Fethullah Terror Organization (FETÖ) were investigated, the banking system was negatively affected amid increasing complaints that it has been blocking various business payment systems.

Worse, even though three-and-a-half months have passed since these troubles began, they have still not yet been solved. A summit was held last week with the participation of outstanding private sector institutions such as the Union of Chambers and Commodity Exchanges of Turkey (TOBB), the Turkish Industry and Business Association (TÜSİAD), the Independent Industry and Business Association (MÜSİAD), and the Turkish Exporters’ Assembly (TİM), headed by Prime Minister Binali Yıldırım. The aim of the summit was to discuss the effects of the state of emergency on the economy and business world, the troubles experienced, and possible measures. 

It was a closed meeting, but we know that the business representatives complained about harsh practices such as the freezing of all bank accounts and the seizure of company assets, including one targeted because one of its partners with a 5 percent share is affiliated with FETÖ. Because of these investigations, normal commercial activities have not restarted and everyone is afraid of doing business, it is reported. 

State of emergency measures have also scared both local and international capital, with the already growth-troubled economy facing a risk of further weakening. 

The business world is saying that the nonfunctioning of normal judicial procedures because of the state of emergency is fueling troubles. It says everything should return to normal as soon as possible, allowing local and foreign investors to be able to see the future. 

Multiple issues 

The problems of the business world are not limited to this. Before anything else, the increase in the expectation of the U.S. Federal Reserve’s rate hike causes capital outflows and, consequently, the rise in foreign exchange rates top the issues. Also, the strengthening of Fitch’s expectation of a cut to Turkey’s rating causes the disruption of expectations in the economy and business world.  

More than anything else, the rapid rise in the foreign exchange rates negatively affects Turkey’s real sector, which has high external loans. This reflects negatively on the banking system, causing trouble in the credit supplies of the real sector and increasing costs. 

The loss of confidence, also fueled by the foreign exchange rates, negatively affects consumption. This tendency aggravates the situation of the indebted real sector. The news that even big companies such as Türk Telekom are not able to pay their debts has worsened the mood of the business world. 

If you add the domestic and international political issues, terrorism and clashes to this, the picture becomes gloomier. In short, hopes for the future in the economy are constantly diminishing.