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For Turkey, Erdogan Victory Brings More Risky Economic Policy
Turkey’s President Recep Tayyip Erdogan was re-elected in June 2018 and his victory brings more risky economic policy for Turkey. Erdogan is known for his strong and decisive leadership style and he has been at the forefront of Turkey’s political scene for almost two decades. However, his economic policies have been a concern for economists and investors.
The Turkish economy is facing a number of challenges, including a high current account deficit, low level of foreign exchange reserves, high inflation, and a sharp decline in the Turkish Lira. Erdogan’s victory in the presidential election has sparked concerns among economists and investors that he will push for policies that could exacerbate these problems.
One of Erdogan’s main economic policies has been to boost growth through massive infrastructure projects, such as the construction of airports, highways, and bridges. While these projects have created jobs and stimulated growth, they have also resulted in a significant increase in Turkey’s debt.
Another concern is Erdogan’s penchant for intervening in the central bank’s monetary policy. Erdogan has previously stated that he believes high interest rates lead to higher inflation and has urged the central bank to lower rates. Erdogan has also been known to replace central bank governors who refuse to comply with his demands.
This interference is particularly worrying given the current state of the Turkish economy. Turkey’s inflation rate is currently at 15.4%, which is well above the central bank’s target of 5%. Investors fear that if Erdogan continues to meddle in the central bank’s policy, it could lead to even higher inflation and a further decline in the lira.
The recent decline in the Turkish currency should also be a concern for Erdogan. The Turkish lira has lost almost 20% of its value against the US dollar this year, making imports more expensive and increasing the cost of borrowing for Turkish businesses. This has led to concerns that firms may default on their loans, leading to a banking crisis.
Erdogan has long been a critic of foreign investors, accusing them of trying to destabilize Turkey’s economy. However, many investors believe that Erdogan’s actions are more to blame for the current state of the Turkish economy. Erdogan’s tendency to assign blame to foreigners also makes it difficult to address the underlying issues facing Turkey’s economy.
Turkey’s relationship with the US is another area of concern for investors. Tensions between the two countries have been rising in recent months, with the US imposing sanctions on Turkish officials and Turkey retaliating with its own sanctions. This has only added to the uncertainty surrounding Turkey’s economy.
In conclusion, Erdogan’s victory in the presidential election brings more risky economic policy for Turkey. His tendency to intervene in the central bank’s policy, his focus on massive infrastructure projects, his criticism of foreign investors, and the recent decline in the Turkish lira are all causes for concern. Erdogan will need to address these issues if he wants to avoid a further decline in Turkey’s economy.