The shocking rebuke of the ruling party in Turkey in Sunday's mayoral elections in Istanbul echoed more than a yearning for new leadership in the country's largest city. He signaled a growing despair for the economic catastrophe that happened to the nation under the strong rule of President Recep Tayyip Erdogan. promises of strong economic growth. Still, unlike an athlete who sets record numbers by increasing drug productivity, he has developed expansion by resorting to aggressive debt. He granted credit to his friends in the real estate and construction sector, who have met the horizons with monumental infrastructure projects
The result is inflation at an annual rate of around 19%, which is a matter of ordinary money. people and businesses. Farmers are stuck to pay sharply higher prices for imported fertilizers and fuels for their tractors. Families pay more for vegetables and eggs. Factories pay extra for imported components such as electronics and parts. The official unemployment rate exceeds 14%.
The most serious concern is the companies that have allowed Mr. Erdogan to build, after their balance sheets worsen with the fall of the pound. Much of their debt is denominated in dollars, which means that their weight increases when the Turkish currency loses value. The bulk of their revenues are in lira, a potential lethal mismatch that threatens bankruptcy. according to official data. Private companies are responsible for about two-thirds. Private companies owe another 138 billion dollars in foreign currency debt, due next year.
Given that Turkey's total economic output is about 766 billion dollars last year, these debts are enormous. They have given Turkey a claim for an undesirable distinction: only Argentina seems to be at greater risk of going into a complete crisis.
More than economic factors explain the deepening of Erdogan's worry. Having cultivated power by reducing the role of the military in national life by allowing Muslims to practice their faith, liberated from the state-imposed secularism regime, in recent years they have been attacking democratic institutions by crushing disagreement, seizing the property of its enemies, and storming the press.
By choosing to give the main opposition party, the People's Republican Party, control of Istanbul, the city where Mr Erdogan's political career began a quarter of a century ago, voters appear to be generally unhappy with this
But the common denominator in the life of Turkey, the factor that crosses traditional political differences, is the uncomfortable decisive force of the economic downturn. "Inflation is so high, and real wages are declining, and people are thinking that they have to save their money instead of spending," said Nafetz Zuk, a leading economist in the emerging markets of Oxford Economics in London. "They have lost faith in their currency and their spending power."
Turkey is endowed with enormous economic powers – a relatively young population of about 80 million people, growing middle class, a place at the crossroads of Europe and Asia and glory
But Turkey has long been dependent on imported goods and money in foreign- a currency that makes the Pound's fall particularly painful.
Economy Declines in Recession in the Last Half In the first three months of 2019, modest growth resumed, with the economy rising 1.3% over the previous quarter. Most economists believe that this is a temporary phenomenon resulting from the public spending that Mr Erdogan has provided to increase wealth before the local elections in late March.
The underlying situation seems bleak, with no clear path to better days. The central bank maintains short-term interest rates of 24% to prevent more exit money. High interest rates trick investors with increased risk acceptance prizes to keep their money in Turkey. .
n. Erdogan has protested high interest rates as the presumed cause of inflation, which is like accusing the sobriety of the broken furniture left after the last drunk band, and called for them to fall to bring back the growth of the road. The installation of his son-in-law as prime economic oversight last year has violated what remains in the independence of the Central Bank of Turkey.
Erdogan could use his powers to create interest rate cuts, send another credit to credit through the economy and, at least for some time, to make businesses feel better about their prospects. He could add to state-sponsored celebrations, taking advantage of Turkey's still officially low levels of public debt
But that would call for another fall in the lira while still believing in the economic governance of Turkey. The result will be greater inflation, exacerbating pressure on consumers and business.
Or Mr. Erdogan can accept what he has long dismissed as inadmissible – much lower growth rates of 6 and 7 percent per year he is accustomed to Perhaps when the corporate sector finds its way to solvency.
The verdict of the mayoral elections in Istanbul shows that people in Turkey's largest city are not crazy about their choices and are not confident of the country's leader.
International markets seemed pleased with the likelihood of Erdogan weakening, with the pound rising modestly when commerce began on Monday. Those who control the money have apparently lost confidence in the Turkish president and enjoy the prospect of another party taking advantage of some of the economic levers.