Being a money laundering haven, which was the main obstacle to its EU membership, or a tourist destination is not enough for Turkey, a third world country, to play the role of a first class country in terms of economy and finance by earning dirty money. We can all hear now the sound of its moaning and the devastation of its economic machine as one of the consequences of a long economic stagnation. The country is suffering deeply from the pandemic of declining tourism revenues and the real weaknesses of its economy, the one that was fueled by investments from around the world and the sale of real estate. The question is: “How will Erdogan’s government manage to control the protests of the population in the wake of a 300% inflation rate?
No one expected good inflation figures
The new peak reached since the AKP succeeded President Recep Tayyip Erdogan in power 20 years ago is fueling debate about it. A journalist and law professor Ersan Sen argue loudly on television. Sen says 59 percent of people can’t get by on their money anymore. “And another 27 percent say they are about to.”
People in an Istanbul market describe how bad the situation is for them. There is talk of inflation as high as 50 percent in a few weeks. One man says he keeps a close eye on rising prices. “I go to the market twice a week, on Monday and Thursday. And I always shop at the same stalls. But even between Monday and Thursday, the prices go up,” he says. Government talks about good tradeIn contrast, if you listen to Turkish Finance Minister Nureddin Nebati, things don’t sound so crazy. In a speech after the announcement of the new inflation rate, he gives the impression that he is trying to say, “Crisis – what kind of crisis?” The economy’s capacity utilization is around 79 to 80 percent, Nebati says. “In fact, the Turkish economy and population are not only living with high inflation since the new figures were announced. Inflation has been in double digits for years. But this is eating away at both the reserves of companies and the savings of the country’s inhabitants.
Experts expect a further rise experts like Hakki Öztürk, from the renowned Bahcesehir University, do not see the situation easing. “Inflation can go up to 70 percent and then fall back a bit,” he says. “In the best case, it will be around 45 to 50 percent by the end of the year.” Personnel costs are low. By contrast, price increases in other areas are all the more significant. In the transport sector alone, official statistics indicate an inflation rate of about 100 percent per year. Energy prices, which have recently risen sharply internationally, are acting as a catalyst in Turkey, which has few raw materials and depends on imports.
Low interest rates for more investment
Government is primarily responsible, says expert Öztürk. In defiance of all economic principles, it has continued to lower interest rates. “If there had been no interest rate cut, neither the exchange rate would have been as bad, nor inflation as high – and interest rates on government bonds in dollars and Turkish lira would not be as high either,” says Öztürk.Low interest rates for more investment – that is the heart of the so-called Turkish economic model. Low interest rates for more investment – that’s the heart of the so-called Turkish economic model. it will take time for it to work, says Finance Minister Nebati. It’s true: interest rates are low relative to inflation. And the exchange rate of the lira against other currencies has also stabilized – albeit at a low level.and this will continue, says Nebati: “Then agriculture will produce more. There will also be a boom here because of the good weather. Trade is also alive – and hopefully the war will end soon. And: Our income from tourism will increase beyond our expectations.”
Concerns in the tourism industry
At the same time, tourism entrepreneurs are worried about the war in Ukraine. For recently, a few million Russians and Ukrainians have come to Turkey. But none of this is due to the misery in which the opposition sees the country. According to the spokesman for the largest opposition party, the CHP, Faik Öztrak, only the government is to blame. “They said they would make Turkey one of the ten largest economies. But they only placed it among the ten countries with the highest inflation in the world,” Öztrak said. “Who is responsible for all this? Who is the head of the government of this country? Of course: Recep Tayyip Erdogan.”