Establishment of Babacan’s party postponed over expectations on Turkish economy - columnist

A group of former luminaries of the ruling Justice and Development Party (AKP) has postponed plans to establish a rival political party over expectations that Turkey will face even a deeper economic crisis in a few months, Muharrem Sarıkaya, a columnist of the Habertürk news site, said on Friday.

Reuters and some Turkish outlets reported earlier that the new party would be established likely in September under the leadership of the former deputy prime minister Ali Babacan, who resigned from the AKP this week.

But according to Sarıkaya the plans for the new political party that will rival the AKP are postponed till the end of this year or the beginning of next year for several reasons, including expectations for a severe economic downturn in the following months. 

Analysts expected that once it was established, the new party would be able to form a parliamentary group with names that would leave the AKP and other opposition parties. But after a reevaluation, the former AKP officials decided that the costs of making the AKP lose its majority in the parliament and therefore creating an environment for early elections might be higher than their benefits, according to Sarıkaya.

“First of all, this opinion that rests on the assumption that an economic crisis will erupt in a few months principally depends on the approach that ‘we should avoid being portrayed as the cause of economic problems, not allow us to be the scapegoat’,” Sarıkaya said. 

The columnist said according to the group a new government that could come to power after a potential snap election would fall into the situation of former Greek Prime Minister Alexis Tsipras, as it would have to implement severe austerity measures. 

Turkey’s economy emerged from a recession in the first quarter of this year with a 1.3 percent growth in the three months to March. Turkey’s economy had plunged into a recession after a currency crisis sent the lira to record lows in August. The government has since sought to stimulate an economic revival with tax cuts and cheap loans from state-run banks.

Fitch solutions said last month that the economy was contracting again after borrowing costs rose on the international markets for Turkey’s heavily indebted firms, hurting business profits and consumer demand. Fitch expects Turkish economy to contract 1.9 percent in 2019.