Will Erdogan’s misguided economic doctrine drag him into next year’s elections in Turkey?

By Mahua Venkatesh

New Delhi, May 9: Against a backdrop of rapidly deteriorating macroeconomic conditions in Turkey, the road ahead for the country’s President, Recep Tayyip Erdogan, is set to get more complicated. Turkey is set to go to the polls in June next year amid a crumbling economic fabric. In April, Turkey’s inflation rate measured in terms of the consumer price index fell by 70% to 69.97%. Despite skyrocketing inflation, an adamant Erdogan is pursuing a low interest rate policy, citing the principles of Islamic banking.

“As a Muslim, I will continue to do what our religion tells us. This is the commandment,” Erdogan, the country’s radical transformation officer, said in a televised address to the nation in December.

He added that Turkey has abandoned the monetary policy based on high interest rates which has stagnated several developing countries. Erdogan had hoped a low interest rate regime would boost manufacturing, but Turkey’s Purchasing Managers’ Index (PMI), a key gauge of business conditions in the manufacturing sector, fell to 49.2 in April against 49.4 in March, signaling a further contraction in factory activity. . The April PMI reading was the lowest since May 2020. In fact, the PMI reading has been steadily falling since the start of the year.

Despite the surge in the inflation rate, Turkish Treasury and Finance Minister Nureddin Nebati assured that the inflationary trend was not afraid that it “will not spread in the long term and will be permanent”.

Turkey’s central bank forecasts the annual inflation rate to peak at around 70% by June, then start to decline to around 43% by the end of the year and hit single digits. by the end of 2024.

“The central bank has lost its autonomy, central bank governors have been changed in quick succession…so we have to see if these projections make any real sense,” an analyst told India Narrative.

The economic situation worsened with the Russian-Ukrainian conflict. Almost all of Turkey’s oil and gas needs are imported. The trade deficit widened to $6.1 billion last month.

While the Turkish lira stabilized somewhat after a series of measures taken by the Turkish central bank, it was the worst performing currency in the world in 2021. In an effort to support the lira, the country’s central bank has introduced new reserve requirements. rules allowing banks to control the growth of loans and to encourage the conversion of foreign currencies into liras.

“With the widening trade deficit and soaring inflation, the imbalances in the Turkish economy threaten to sabotage the government’s economic program,” said online news portal Ahval.

Erdogan’s Saudi visit

Desperate, Erdogan hopes his recent visit to Saudi Arabia will usher in “a new era”. His visit to Arabia was the first since 2017.

The New Arab news portal said the president’s popularity was declining as macroeconomic indicators fell. “He desperately needs foreign investment in the country,” the news portal said.

Erdogan begins to prepare for the elections

Erdogan, in power since 2002, is doing his best to retain the presidency, especially after the setback in the 2019 local elections. He suffered a defeat in Istanbul as in Ankara.

Last month, he introduced major changes to the country’s election rules. Erdogan’s new rules have made it harder for smaller parties to win seats on their own, although the threshold for any party to enter parliament has been reduced. Under the new regulations, the president will also be exempt from rules prohibiting ministers from using state resources to organize their campaigns or attend rallies, Bloomberg said.