Since the 2018 economic crisis, when the value of the lira plummeted and borrowing costs soared, Turkey’s economy has achieved a miraculous ‘V-shaped’ economic recovery from a recession lasting three quarters to a return back to quarterly growth above 1 per cent in the first three months of 2019.
But this quick turnaround has been built on vast amounts of cheap credit used to re-stimulate a consumption and construction boom. This so-called ‘triple C’ economy generated a rapid growth spurt akin to a modestly able professional sprinter injected with steroids.
This has made the currency vulnerable. The lira has steadily depreciated by 11 per cent against the US dollar since the beginning of 2019 and crossed the rate of 6 lira versus the US dollar on 7 February.… Seguir leyendo »
Turkey’s government seems to fail to appreciate that politics may eventually push the economy over a cliff-edge.
According to IHS Markit, a London-based global information provider, the ‘degradation of institutional integrity, particularly relating to the central bank; high short-term external obligations in the private sector; low net reserves; and a paucity of portfolio capital investment inflows,’ will fuel the continued descent of the Turkish lira.
This may trigger, should the current trajectory persist, a chain reaction of bankruptcies across a Turkish private sector owing over $200 billion dollars of foreign-currency denominated loans. In turn, Turkish banks and other financial institutions might witness a rapid capital quality downgrade and, thereby, trigger panic among the populace.… Seguir leyendo »
Fifteen days after Turkey’s parliamentary and presidential elections, Turkish President Recep Tayyip Erdoğan appointed a new government under radically enhanced executive powers granted by the constitution. He chose 16 loyalists and partisan figures to ensure that he remains front and centre in decision-making and policy formation.
Most notably, Erdoğan sacrificed the former deputy prime minister and ex-Merrill Lynch chief economist Mehmet Şimşek in favour of his inexperienced son-in-law Berat Albayrak as finance and treasury minister to manage the fragile economy. Whether he has the competence to placate jittery financial markets and foreign investors is debatable.
Erdoğan will prioritize short-term growth at all costs to the detriment of macroeconomic and financial stability.… Seguir leyendo »
President Recep Tayyip Erdogan’s dream of transforming Turkey into a powerful executive presidency is one step closer to reality.
Last Saturday, the ruling Justice and Development Party introduced a 21-article constitutional amendment to vastly strengthen the powers of the head of state.
With the support of right-wing Turkish nationalists, the parliament will probably promulgate the package for endorsement by a popular referendum by mid-2017.
Turkey’s proposed presidential system will abolish the role of prime minister while granting authority to the president to issue law, declare a state of emergency, dismiss parliament and to appoint ministers, public officials and half of the senior judges.… Seguir leyendo »
Signs of growing anger at the restrained denunciation of Pennsylvania-based Muslim cleric Fethullah Gulen – whose followers are thought to have played a key role in the attempted coup – are being vocalised more and more, but this criticism only shows part of the true picture.
It is true that prominent liberal Turkish intellectual Soli Ozel spoke for many when he criticised EU politicians and Western media for failing to recognise the “invaluable democratic resistance shown by all political parties in a parliament bombed by war planes”, as well as demonstrating “a lack of sensitivity, empathy and solidarity that cannot be easily digested” by not sending anyone from an EU institution to offer solidarity with the Turkish parliament.… Seguir leyendo »
President Recep Tayyip Erdogan has responded with an iron fist to last Friday’s failed military coup attempt in Turkey by detaining, dismissing or suspending, so far, 60,000 military officers, police and intelligence officials, judges, teachers, academics and civil servants, and imposing a widespread travel ban and a three-month state of emergency. He is vowing to reintroduce the death penalty, abolished in 2004 as part of reforms required for opening EU accession negotiations.
This uncompromising approach in the post-coup period will have profound negative implications on Turkey’s domestic politics, security and foreign policy in the foreseeable future to the detriment of its stability and prosperity.… Seguir leyendo »
Turkey, once a paragon of relative tranquility in a volatile Middle East, is engulfed by insecurity — as today’s car bomb attack against a police bus in Istanbul cruelly illustrates.
Suspicions will likely fall on the separatist militant Kurdish group the Kurdistan Workers’ Party (PKK), which carried out similar incidents in Ankara last January and March.
President Recep Tayyip Erdogan will probably approve the lifting of immunity against the 50 pro-Kurdish members of parliament to facilitate criminal prosecutions against them and potentially dislodge them from their seats.
He will also use this tragedy to impress on Turkish voters that Kurdish and Islamist militancy can only be thwarted by transforming Turkey from a parliamentary system into a powerful executive presidency.… Seguir leyendo »
All is not well in the Turkish economy. At a time when global financial markets are jittery, Turkey is witnessing a rapid depreciation of the lira and accelerating inflation, driven largely by the political interference of President Recep Tayyip Erdogan in the Turkish central bank.
Despite repeated entreaties by central bank governor Erdem Basci to support the lira after it declined by 20 per cent against the US dollar in 2015, Erdogan has steadfastly hampered his efforts. Basci had plans to transition from an opaque monetary policy – in which interest rates are allowed to move within a ‘corridor’ between the borrowing and lending rate – to a conventional single interest rate strategy, but these were abandoned under pressure from Erdogan.… Seguir leyendo »
The suicide bomb attack that hit Istanbul on Tuesday, resulting in ten, mostly German, fatalities in the tourist district of Sultanahmet, is symptomatic of the innumerable challenges facing the Turkish government.
Top among them is combatting the Islamic State of Iraq and Syria (ISIS) militant group, which Prime Minister Ahmet Davutoglu implicated as the main culprit.
ISIS militants have perpetrated a number of major, violent attacks in Turkey, including the death of nearly 100 pro-Kurdish and left-wing activists in Ankara in October 2015.
But the Istanbul attack constitutes a wholly different magnitude in its targeting of the vital tourist sector that accounts for a staggering 12 per cent of the Turkish economy, according to a recent report by the World Travel and Tourism Council.… Seguir leyendo »