Murat Yetkin:  Understanding Erdogan’s motives

President Recep Tayyip Erdoğan reiterated his life-long stance against (high) interest rates on Nov. 17. The following day, Central Bank lowered the interest rate 100 basis points to 15. Turkish Lira further depreciated against foreign currencies like US Dollar and Euro, as 1 Dollar is worth 11,5 TL, while 1 Euro is 12,5 TL. As might be expected, the first outcome is to be a further hike in gasoline, diesel, and gas prices. The people of Turkey are the ones who will be the most affected by this outcome.


The question is, why Erdoğan is doing this? Why would a President do this to their country?

The President expressed his discontent with the Turkish Industrialists and Businessmen’s Association (TUSİAD) and other capital groups, stating that there is no investment in the country despite low-interest rates. Angry at foreign capital for not investing in Turkey. But why do they not invest in Turkey?


More unfortunate than that is

Erdoğan is not aware that this mistrust is not for Turkey but for him. More unfortunate than this scenario is that Erdoğan and his supporters believe that what they are doing is true and correct while asking for votes trying to swallow their wrong deeds as good with their psychological propaganda tools. We learn these from the journalists who have tied their journalistic fate with that of the administration. We should be thankful for their existence.


For example, we learn from daily Hürriyet Newspaper’s Ankara representative Hande Fırat’s op-ed on Nov. 18, titled “the reasons of the policy to lower interest rates,” she reported from the Presidential sources.


According to the sources, what happened to us, is the assurance of what will come. Because “the bitter recipe” is on the way. Government, she says, lowers the interest rates despite this environment, totally being aware of the political outcome. If you ask why, the answer is that “when the interest rates fall, there will be more investments, more employment and a gratified public voting for AKP-MHP. With the help of the presume feel-good factor, AKP will continue its MHP-backed power in the 2023 elections.


It is like a joke,  only it isn’t


As you can see, this strategic reasoning is based on a grand assumption: if I can lower the wages with the low-interest rates, investments and export will rise.


Erdogan is unaware that the distrust is not in Turkey but him; and that the problem stems from the uncertainty in him and his administration.


What does Erdoğan believe? Will Elvan go?

First of all, he believes that the industrial export boom seen after the shutdown due to the Covid-19 outbreak and disruption of supply chains originating from China will be permanent.


The talk in Ankara is that his top economic advisors made Erdoğan believe that the export boom will be permanent and if the exchange rate rises, it will cause the decrease in the wages and consequently attraction of foreign investment.


There is a cause-effect relationship between Erdoğan’s statement on Nov. 17 at the AKP Parliamentary group where he stared at Treasury and Finance Minister Lütfü Elvan while saying “those who are in favour of interest rates cannot be with us,” and the brief notes including certain remarks of Elvan’s previous speech at Capital Markets Committee on Nov. 16 brought to the President’s attention.


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A day earlier, Elvan’s statements, “we are not at the desired level in inflation,” and “every institution should do its  job” was interpreted as a criticism of the Central Bank policy and, therefore, Erdoğan. Elvan did not applaud Erdoğan during his AKP speech and indirectly expressed his will to leave his position. But a few in Today’s Turkey can show their will to leave office unless Erdoğan finds it appropriate, such as the Turkish Aeronautical Association trustee. He cannot leave.


Who would replace Elvan?


Surely it will be someone who will make Erdoğan believe the benefits of this evil that were deemed proper for Turkey and the Turkey’s public in a manner that will find its place in theology. The name is not that much important anymore.


Pessimistic Scenarios

According to Hande Fırat, who reported from the Presidency, this perilous economic policy aims to reverse the financial picture until June 2023 to put a smile on the public’s face. There are eighteen months (18 months in numbers) for the 2023 elections. All indicators show that the growth figures in 2022 and 2023 will be below the growth figures brought by the export boom after the coronavirus shutdown.


Within these 18 months, will the domestic and foreign capital that will invest in Turkey build factories, start production, put an end to unemployment, and make the voters go and elect AKP MHP again?




Do they hope that Turkey’s factories and institutions, which have already become 30 percent cheaper within one year, will be bought by foreign capital? Opposition is also concerned about that. Do not solely think of Qatar, Israel or United Arab Emirates, which Erdoğan decided to make peace again. Or do not only think about China, which buys cheap economies one by one. Rather than Arab countries, Erdoğan wants the US and EU countries which emphasize competition with China and Russia to come.


He also wants to increase the minimum wage by printing unbacked money and artificially increasing the money in the pockets of people whose purchasing power has already decreased.



Excerpt only, visit Yetkin Report which has excellent coverage of Turkish economy and political affairs

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Published By: Atilla Yeşilada

GlobalSource Partners’ Turkey Country Analyst Atilla Yesilada is the country’s leading political analyst and commentator. He is known throughout the finance and political science world for his thorough and outspoken coverage of Turkey’s political and financial developments. In addition to his extensive writing schedule, he is often called upon to provide his political expertise on major radio and television channels. Based in Istanbul, Atilla is co-founder of the information platform Istanbul Analytics and is one of GlobalSource’s local partners in Turkey. In addition to his consulting work and speaking engagements throughout the US, Europe and the Middle East, he writes regular columns for Turkey’s leading financial websites VATAN and and has contributed to the financial daily Referans and the liberal daily Radikal.