Babacan likens Turkey’s economic story to Netflix drama

Former Turkish Deputy Prime Minister Ali Babacan said developments in the country’s economy since President Recep Tayyip Erdoğan’s governing party assumed power in 2002 resembled a television series.

Erdoğan’s policies were constrained by other senior members of his Justice and Development Party (AKP) during the early years, but that changed as he began to ignore advice and erode the independence of key institutions, said Babacan, who set up the Democracy and Progress Party (DEVA) in 2019.

“I think there are series of episodes, like a Netflix drama,” he told Nikkei Asia in an interview published on Tuesday. “During the first years of his rule, if two or three ministers objected on a matter, (Erdoğan) could not proceed.

“However, after three electoral wins (in 2002, 2007 and 2011) and nine years in power, starting from 2011, (Erdoğan) grew too self-confident and started not to consult anyone. ... Institutions (were) being downgraded, and he started to attack the central bank,” he said.

Babacan served as economy minister between 2002 and 2007, as foreign minister from 2007 to 2009, and then as deputy prime minister in charge of the economy between 2009 and 2015. He is credited with successfully completing an economic programme with the International Monetary Fund between 2002 and 2008.

Turkey’s economy slumped into a currency crisis in 2018 after Erdoğan sought to railroad growth and tussled with the United States over the detention of a U.S. pastor on terrorism charges. The spat resulted in economic sanctions.

Last year, the lira sank to fresh record lows as a compliant central bank kept interest rates at below inflation to help Erdoğan engineer a borrowing boom and spent tens of billions of dollars of its foreign exchange reserves defending the embattled currency.

Erdoğan sacked the governor of the central bank in early November, the second such dismissal in less than two years, bringing in former finance minister Naci Ağbal. He also hired Lütfi Elvan, a former deputy prime minister, as treasury and finance minister the same month, after his son-in-law Berat Albayrak resigned from the post.

Ağbal has hiked the central bank’s benchmark interest rate to 17 percent from 10.25 percent to help rein in inflation, which accelerated to 15.6 percent in February, and to defend the lira.

Babacan said Ağbal and Elvan "are good tacticians" but their career backgrounds as bureaucrats undermine their ability to stand up to Erdoğan.

“They tell what is necessary but when they are instructed, they obey the instruction,” he said.

“Will president Erdoğan be patient enough for rate hikes to produce results in taming inflation? It is a big open question,” he said.