Turkey, for example, lived tough economic situation in 2022, with its national currency lira experiencing its record lows against the US dollar in a decade and severe inflation hitting its economy. However, in recent months, things set to relatively improve. According to figures published by the Turkish government, the annual inflation rate in December reached 64.27, down from the 84.39 in November.
This is the second month in a row that the annual inflation rate is on the decline after reaching 85.5 percent in October, which was unprecedented in the past 24 years. According to economists, the decrease was mostly driven by the change of the base month for calculating the annual inflation rate.
However, some economic critics believe that the government of Turkish President Recep Tayyip Erdogan declares the inflation rate lower than what it really is, arguing that the country’s inflation rate was 135 percent in December.
The Turkish President Recep Tayyip Erdogan believes that the inflation highs in his country were driven by the war in Ukraine, but his critics believe that regardless of the impact of the Russian military operation in Ukraine, the pressure of the Turkish president on the central bank to lower the interest rate from 19 percent to 10.5 percent while the lira value drop, heightened the inflation.
Other economic data also indicate a downward trend in inflation, and according to official figures, the monthly inflation rate was 1.2 percent in December, down from 2.9 percent in November. On the other hand, consumer spending increased by 1.018 percent in December compared to the previous month, and the economy grew by 3.9 percent in the third quarter of 2022. In late 2022, the lira hit a new low, losing another 30 percent of its value, but remained largely flat in the two months leading up to the end of the year.
Export growth driven by Ukraine crisis
The war in Ukraine and lira price slump have been beneficial to the Turkish economy that has struggled to survive in 2022. Turkey’s exports hit record highs last year as the lira’s devaluation made consumer products more competitive abroad, and Ankara also benefited from closer economic ties with Russia after the Ukraine crisis, according to figures from the Financial Times. In a televised speech, Erdogan said that Turkey recorded a 13 percent increase in exports, and its value reached $254 billion in 2022.” He called the increase in employment and exports in the middle of the global crisis as one of the important achievements of his government.
After the West imposed sanctions on Russia, Turkey sought to replace the European countries in the Russian market and was successful in this goal to some extent. The increase in exports at the current time can help to increase government revenues and strengthen Erdogan’s political status on the eve of the elections. Despite the increase in Turkey’s exports in 2022, due to lira value loss, the country’s imports have reached $364.4 billion, showing a 34 percent jump. In other words, it shows $110 billion trade deficit, indicating that there is a long way to go to reverse this deficit.
Dim economic outlook
Preparing to compete for re-election in June, Erdogan has already introduced economic incentives to win the public opinion. Increasing employee and worker salaries and removing the age limit for retirement were among the measures that have been welcomed. However, pay hikes in this chaotic economic situation can prove expensive for the government, because, according to experts, the increase in government spending without alternative sources of income will empty the government coffers and increase the inflation rate in the future. These analysts warn that a wave of populist social protection measures announced by Erdogan ahead of the election will destabilize current economic policies.
Although Erdogan argues that the economic conditions would improve in the near future due to the new economic policies, some question the validity of his promises. Experts believe that Turkey would have a very difficult economic outlook after the elections, as the current policy mix is disastrous. JPMorgan says that raising the wages will boost economic activity in the first quarter of 2023, and production is expected to grow at an annual rate of 7.8 percent, but adds that the government’s unconventional economic measures are “unsustainable” and would worsen the inflation.
Given the downward trend of inflation and price drop based on medium-term economic forecasts, Ankara predicts inflation of 24.9 percent until the end of 2023, but some economists stress that Turkey can reduce inflation to 44 percent at best, and is far from capable of forcing them lower.
Being in power for two decades, Erdogan has managed to considerably improve Turkish economic position globally and even elevated the country to the top 10 global list in tourism and agriculture. But his ambitious policies along with the international crisis in the past three years put the Turkish economy in a downward path.
The chaotic economic situation of Turkey last year took place while in recent years the Persian Gulf Arab monarchies have invested tens of billions of dollars in the Turkish economy. Qatar by itself invested $23 billion in this country and another $10 billion in investment is expected in the coming months. But it seems that these aids have not had much effect on the improvement of Turkey’s situation. If Turkey’s economic situation continues in the same way, the Saudis may review their intention to invest $5 billion in Turkish economy.
Erdogan’s volatile position in elections
Despite some relative economic improvement and some incentives provided by the government, the political conditions are not going in Erdogan’s favor, with his chances for retaining the post still being low. Erdogan is trying to win the presidency for the third consecutive term, and to achieve this goal, he has activated his diplomacy over the past year by restoring relations with neighbors and countries in the region. The normalization of relations with the Persian Gulf monarchies and Israel and the attempt to resume relations with Syria after eleven years of tensions show that Erdogan does not intend to simply cede the power to rivals and is trying to improve his foreign policy record as the elections near.
Although Erdogan’s successful management in the Ukraine crisis and the strengthening of diplomacy with neighbors have raised his political status to some extent, he still has a long way to persuade the public to vote for him. According to the polls, Erdogan is in serious political trouble as the public support rate for him is only 30 percent. According to the results of a poll, if there would be a runoff in the election, Erdogan will lose against four possible candidates.
Observers suggest that Erdogan brought the Turkish economy to a state of collapse in the past years and made the middle class poorer and this can work against him in the upcoming elections. Although Turkey has recently sought to signal changes in its past policies and pushed to defuse tensions with regional states, but given Erdogan’s troublesome ambitions in the past decade, regional leaders do not have much confidence in the stability of Erdogan’s positions, and observers believe that this could be a tactical move to win the elections and the situation may return to its past after the elections.
Either way, Erdogan would push to turn the tide in his favor and the
only option left is normalization with Syria. He is in a hurry to work
out a thaw with Damascus to improve relations and arrange return of
Syrian refugees in order to regain public acceptance and win presidency.
But even if the Syrian government helps pave the way for normalization
in this remaining short time, Erdogan’s rivals have some cards to play
with. Economy and destabilizing regional policies over the past decades
are adequate play cards for the opposition to bring Erdogan’s era to a
close.
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