Jul 17 2018

Erdoğan will put Turkey on “war footing” - economist

Turkish President Recep Tayyip Erdoğan will put the country on a “war footing” to retain his popularity, according to economist Murat Muratoğlu.

Turks voted for Erdoğan in June 24 elections because he convinced them that they must make financial sacrifices as Turkey battled with foreigners intent on bringing the economy down. Such rhetoric will intensify in the coming months, Muratoğlu, who is a columnist for Sozcu newspaper, told Turkish news website Diken in an interview.

Venezuela’s government has managed to stay afloat despite a severe crisis, and so will Erdoğan's, using the same methods of blaming the economy’s deepening problems on enemies that do not exist, he said. The situation is due to come to a head at the end of August, when foreign funds start withdrawing capital from the country at increasing rates, he said.

Turkey’s lira has slumped more than 20 percent against the dollar this year and inflation has surged to 15.4 percent, about four times the average in emerging markets, as government stimulus measures raised concern among investors that runaway economic growth would be followed by a crash. At the same time, Erdoğan, who believes higher interest rates cause inflation, a view that restricts the central bank's room for maneouvre, is tightening his grip over economic decision-making 

It is rumoured that Erdoğan’s son-in-law, Berat Albayrak, who the president appointed to take charge of the economy last week, will visit London to talk with investors within the next couple of weeks. But he has no convincing economic plan to put forward, so he is delaying the trip, Muratoğlu said.

Albayrak outlined government plans for the economy last week that were short on detail. He pledged a stronger central bank and to reduce inflation to single digits in the shortest possible time, but did not mention exactly how that would be achieved aside from pledges to tighten the budget.

In the meantime, Turkish businesses are having problems repaying their foreign currency loans, meaning the economy is full of “zombie companies”, and it is only a matter of time before many of them go bust, Muratoğlu said. No one is accepting the degree of the problem, which is forcing banks to restructure loans on easy terms and kick the can down the road, he said.

Having won a new term with increased powers in an election on June 24, Erdoğan is now facing local elections in March. There will be no meaning to his enhanced presidency should his Justice and Development Party (AKP) lose Turkey’s major cities, Muratoğlu said