Turkish President Recep Tayyip Erdogan, a few days before the elections scheduled for tomorrow, May 14, moved to decisive action. He raised the salaries of 700,000 civil servants by 45%. The minimum wage for this category of citizens was increased to 15,000 liras (about $770). It is clear that Erdogan is trying to get the favor of the electorate in this way.
“Erdogan’s economic policy was not perfect. The Turkish domestic market suffered a very big loss. The population is extremely unhappy with what happened. They began to live two, if not three times worse with rising inflation in the country and the depreciation of the national currency – the lira – against the US dollar. The dissatisfaction of the population is more than justified, and for Erdogan this is a very dangerous moment. Erdogan may lose ,” Vasily Koltashov, head of the Center for Political Economic Studies of the Institute of the New Society, told Paragraph.
Türkiye is facing a massive currency crisis. At the end of 2022, inflation there amounted to 64.27%. The savings of the population are rapidly depreciating, and solvency is falling. Türkiye found itself in this position due to the president’s economic experiment. He actually cracked down on the independence of the Central Bank and imposed his monetary policy on it. Its essence lies in the fight against rising inflation by lowering the key rate.
The logic is this:
The rate is reduced → money becomes cheaper and more profitable for business → business increases production → more goods and food are on the shelves due to increased supply → prices begin to fall
It seems that there is a sense in this approach, but economic practice is still taking precedence over theory, and in life everything looks different:
There is more money in the market → their value falls → inflation rises
Who will win the upcoming elections is still a big question. It comes to the point that polls on one street in Istanbul give victory to the opposition leader Kemal Kılıçdaroğlu, and on the next one – to the incumbent president.
Economic indicators with which Türkiye approaches the elections:
- annual inflation reached 43.7% in April 2023
- trade deficit increased by 43.9% in April
- Central Bank reserves dropped below $116 billion
- for one dollar they give 19.5 Turkish lira, although two years ago the rate was 8 lira per dollar
The likelihood of political change in Turkey is very high. For our country, Erdogan’s departure after 20 years in power is not the best scenario, since it will mean Ankara’s turn to the West.