Turkey condemned to learning the hard way

Turkey condemned to learning the hard way

The international credit ratings agency Moody’s said in statement released on Aug. 15 that the election of Prime Minister Recep Tayyip Erdoğan as president “is unlikely to resolve Turkey’s key economic and institutional credit challenges because of ongoing domestic political tension and uncertainty that will prevail at least through the next parliamentary elections.”

Fitch, another key international ratings agency, came to a similar conclusion on Aug. 11. One does not have to be an economic expert or a political scientist, of course, to understand what these assessments are based on. Reading the papers in Turkey and following Turkish politics is enough for anyone to come to the same conclusions.

This is especially the case now that there are signs of unrest within the ruling Justice and Development Party (AKP) on the question of who will take over from Erdogan as prime minister. Reports that Erdoğan may bring one of his rabidly anti-Western advisors to a key position with regard to the economy is not enhancing Turkey’s image either.

Understandably, the government is angry at Moody’s and Fitch. The government’s ties with Standard & Poor’s, another ratings agency, also remain icy, even though it has fractionally increased its estimate for Turkey’s 2014 growth rate.

Erdoğan has made it amply clear in the past that he sees these agencies as lackeys of what he calls the “international interest rate lobby.” Economy Minister Nihat Zeybekci, a staunch Erdoğan loyalist, is sticking to this line also.

“You have to be blind and ignorant not to see the intention behind Fitch’s decision,” he said over Twitter after Fitch released its assessment following the Aug. 10 presidential elections. He did not feel the need to elaborate his loaded remarks, of course.

Zeybekci was equally dismissive of Moody’s after its post electoral assessment. Maintaining that Turkey’s economy will do better under the Erdoğan presidency, Zeybekci claimed in an equally loaded manner on Saturday that Moody’s is worried that Turks will pay less interest and be less dependent on “certain circles.”

Zeybekci dismissed the warnings issued by Moody’s and claimed that his government knew “who this agency is working for.” He added defiantly that Ankara does not care about its assessments. As always, this is nothing but crass populism on the part of the government aimed at assuaging concerned AKP supporters who know no better.

The business community that is working closely with the government, however, is well aware that these ratings agency assessments matter because foreign investors take them seriously. Put another way, it is Zeybekci’s off-the-cuff remarks, which do not contribute anything to the argument, that do not matter.

Otherwise, the government should take international assessments very seriously and try and give more reassuring answers to them, rather than pulling out the hackneyed “interest rate lobby” card which no one except the most gullible believe in.

The government should also be worried that Turkey has been getting a bad press from the international media since Erdoğan’s elections, with very few analysts feeling that this portends well for Turkey’s democracy or social stability, let alone the negative assessments concerning the economy.

Erdoğan and the AKP act as if all this is irrelevant and are pushing on with their defiant ways as if Turkey is immune to such factors. However, they often end up having to face up to facts and belatedly take the necessary steps.

Turkey, it seems, is condemned to always learn the hard way and lose valuable time in the process. To paraphrase Churchill: It always gets it right in the end, but only after having exhausted all other possibilities.