Who is Esfender Korkmaz? Prof Esfender Korkmaz is one of the most senior active economists in Turkey, who had also served as CHP deputy in the Grand Assembly
AKP has a well-known habit of floating trial balloons. It first voices its projects through proxies. Our pulse begins racing, either in support or in anger about the futility of the idea. These trail balloons train the mind to digest the project, and remain indifferent when it is legislated. Enabling AKP heavy-weights like former Speaker of the Parliament Bulent Arinc to throw out the of the postponement of elections due to earthquakes is also a part of this tactic.
Is there a legal basis for postponing the elections? It’s not important. In an environment where the rule of law and the independence of the judiciary do not exist; and where the state is captured by Erdogan, the government can postpone the election if it wishes.
YET; if there is a delay, the political, social and economic cost to society will be high. The AKP government cannot afford this cost.
The state ceased to be an institutional structure based on merit. Turkey became a party state. The impunity of the civil service, the sway of the entire AKP organization over the state, the government’s use of the state as a tool of populism, and the placement of party members in civil service through bogus “interviews”, rather than centralized entrance exam scores clearly demonstrate this situation.
The enslavement of the state causes public services to be disrupted severely. The two examples we experienced in the earthquake disaster showed the weaknesses of the state being monopolized by the party: People in this country don’t trust AFAD (state emergency management agency) for aid, they trust Haluk Levent (a dissident pop singer and activist) more.
Second, the Army was authorized to intervene in the zone only after 40 hours. The military’s authority to intervene directly in disasters was abolished, because Erdogan feared coups, and the Army’s approval rating going up.
Such a party state cannot be sustained in any country and at any time in our age.
The economy does not have a year
Turkey’s economic management is in shambles. Planning has been completely discarded. Central Bank independence was abolished. Ministers, MB presidents and board members who insisted on a positive real interest policy to combat inflation were sacked. The “low interest rates beget lower inflation” approach of Mr. President slowly pushed the economy into crisis. Under these policies and the current administration, political turmoil and economic crises will become endemic.
External deficits and foreign debt service cannot be managed for another year
TURKSTAT announced 2022 foreign trade data. Our annual foreign trade deficit was 109.5 billion dollars. 80 percent of this deficit was recorded against Russia and China.
* 2022 foreign trade deficit with Russia; $49.5 billion;
* 2022 foreign trade deficit with China; 38 billion dollars;
* Foreign trade deficit with Russia and China; 87.5 billion dollars.
* 2022 current account deficit was 48.5 billion dollars.
Turkey needs to roll-over or pay off foreign debt of 186 billion dollars in one year. But the CDS rate is 538 basis points. We are the second most risky (peer) country in the world after Russia. We are borrowing expensively and will have difficulty in rolling over foreign debts.
In summary, the risk of default in external debt is high. Last year, the International Financial Action Task Force announced that Turkey was placed on the ‘grey list’ of countries that did not do enough to combat ‘money laundering’.
“Unidentified” money flows into the banking system save the day, but serves as an obstacle to the inflow of legitimate foreign direct investment. From any point of view, if today’s regime continues; the default risk in foreign debts can become palpable in a year.
Growth is dropping
Internal and external confidence in this government has plummeted. If sentiment collapse continues, the risk of bankruptcy and unemployment will increase.
To illustrate, in the third quarter of 2022, real fixed investments decreased by 1.5 percent. Industrial production index fell by 1.1 percent in November and by 0.2 percent in December—in annual data. Since production is import-dependent, if we have a foreign exchange crisis, it will also fall.
On the other hand; costs such as a decrease in production, job losses, and disruption in education in the earthquake zone can trigger a temporary contraction in the economy and a bump in unemployment. It is worth remembering that wrecked buildings are a loss of wealth. However, the rebuilding of these buildings has a positive effect on growth. However, to gain the maximum benefit from a rebuilding and rehabilitation program detailed zoning and financing plans should be made. Since the political power does not have such thorough understanding of the situation and lacks the human infrastructure, the economic and social destruction of the earthquake is likely to prevail for long.
We will experience low or negative growth in the last quarter of 2022 and 2023. If the government changes, a new confidence, a new dynamism may arise turning sentiment around. If the elections are postponed and Erdogan remains in power, the job of rehabilitant turkey could become impossible.
Translated from the author’s “Yenicag Daily article Seçimi ertelerse AKP kalmaz!..”
Follow our English language YouTube videos @ REAL TURKEY: https://www.youtube.com/channel/UCKpFJB4GFiNkhmpVZQ_d9Rg
And content at Twitter: @AtillaEng
Facebook: Real Turkey Channel: https://www.facebook.com/realturkeychannel/