Presidential election in Turkey: these figures reveal an economy on the verge of crisis

Presidential election in Turkey these figures reveal an economy on

It doesn’t matter who the candidate is, as long as the economy holds. The atmosphere in the trading rooms in Turkey could be summed up as follows in recent weeks, as the country’s indicators are turning red. Two days before the second round of the presidential election, which pits outgoing Recep Tayyip Erdogan against opponent Kemal Kili├ždaroglu, uncertainty hangs over the winner’s ability to stem a black streak for national economic results. And so for the voters purse.

Although annual inflation has reduced its sails, after peaking at more than 80% last year, it is still leveling off at 44%, in particular because of Turkey’s dependence on gas and oil, the prices of which exploded in 2022. The current president, Recep Tayyip Erdogan, in power for two decades, may have fired two finance ministers in two years, but nothing works: more and more Turks do not earn enough to live on their salary. At the end of last year in Turkey, an iPhone was exchanged for the price of a Volkswagen Golf bought in 2015.

The Turkish national currency has lost 80% of its value against the dollar since 2018. To stop the phenomenon, Recep Tayyip Erdogan sold a significant part of his foreign currency reserves: 7.6 billion dollars in the first week alone of May, according to the Turkish central bank. Enough to bring the reserves to around 60 billion dollars, the lowest level since 2022.

A clearance sale that worries investors: “the prospect of a continuation of the current monetary policy in the event of Recep Tayyip Erdogan’s victory creates expectations of depreciation among companies and individuals”, explains in France the Director General of the Treasury, in her latest weekly brief, dated May 24th. In the short term, Erdogan’s economic strategy and the uncertainty caused by the elections caused the Turkish banking index to fall by 15% in one week.

Erdogan against the grain

Instead of raising interest rates, to dry up the money put on the market and thus curb inflation, as recommended by orthodox economists, Erdogan persists in doing the opposite. “You will see, as rates go down, inflation will follow,” he said at a meeting in Istanbul last April, despite results indicating the opposite. The president stubbornly sacks three central bank governors in three years, deemed too refractory to his vision. Still, for many experts, it is precisely this contrarian strategy that is rocking the Turkish economy.

Thus, the country’s experts believe that the situation should worsen in the weeks to come, especially if the scenario of a victory for Erdogan is confirmed this Sunday at the polls. “I don’t think the current government has a plan to fix this situation because they don’t admit that these problems are due to political mistakes,” he said. New York Times Selva Demiralp, professor of economics at Koc University in Istanbul. This raises questions about the resilience of the real economy.

Especially since in parallel with his monetary strategy, Erdogan also launched, before the elections, major expenditure to support the standard of living of the Turks. On several occasions, the minimum wage has been raised, as have the incomes of civil servants. With what means? The February earthquake, its tens of thousands of deaths and destroyed buildings cut part of the national result. The disaster caused 103 billion dollars in damage, or 9% of the annual GDP of the twentieth world power. An economic earthquake could now add to the humanitarian crisis.

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