Barely re-elected as head of Turkey, President Recep Tayyip Erdogan is expected at the turn. The economic matter promises to give him a hard time. We saw this on Monday, May 29, the day after the second round of the presidential election, when the Turkish lira (TL) fell to a historic level against the hard currencies, listing at 20.15 TL for 1 dollar, and at 21 .60 TL for 1 euro.
And the fall is likely to continue, up to 28 TL for 1 dollar by the end of the year according to Morgan Stanley, if Mr. Erdogan were to refuse to change the course of his monetary creed, namely that the lowering interest rates is a cure for inflation.
After exceeding 80% in 2022, it certainly fell to 44% in April, according to official figures. But independent experts believe that it is actually much higher, as evidenced by the many households struggling to make ends meet and buy basic products.
Only the most gullible economists think that the Head of State will return to a more appropriate financial policy. Daron Acemoglu, professor of economics at the Massachusetts Institute of Technology (MIT), is not one of them. “At first sight, his victory is a guarantee of stability. But the continuation of current policies is worrying,” he points.
According to this academic, adviser to the opposition, we need investments, technological improvements, better monetary management. Otherwise, “Economic growth, driven by the construction sector, credit expansion and public spending, will be of poor quality. Corruption and cronyism only make matters worse”he told the daily Karar (May 29 edition).
Inflationary pressures
The elections focused investors’ attention on Turkey, the region’s industrial locomotive, an emerging market of 900 billion dollars (840 billion euros). The possibility of an alternation at the head of state was hoped for, especially since Kemal Kiliçdaroglu, the unsuccessful opposition candidate, had promised to clean up the finances and restore its independence to the Central Bank.
Mr. Erdogan’s monetary policy intentions will be tested on Friday, June 2, when the new government he will lead is announced, the post of Prime Minister having been abolished in 2018. The appointment of the new Minister of Finance and that of of the new governor of the central bank of Turkey, will be followed closely. Late on Sunday evening, the re-elected president spoke of inflationary pressures, promising to put in place a new team with a “international credibility” to manage the nation’s finances.
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