Millions of Turks are facing growing uncertainty as the Turkish lira lost almost 50 percent of its value against the US dollar in 2021. As a consequence, basic food prices as well as the cost of transport and energy increased to more than 36 percent year-on-year in December, the highest it’s been since Turkish President Recep Tayyip Erdoğan came to power 19 years ago. Erdoğan however, appears to be completely unmoved by the situation. In an address to businesspeople in İstanbul on Tuesday, he outlined that his government now plans to simply eliminate the temporary increase in inflation as they had recently strengthened the Turkish lira against the US dollar. Ordinary Turks, however, appear to be growing weary and increasingly unreceptive to Erdoğan’s hope-mongering.
Some 60 percent of Turks say in street interviews that inflation has increased to more than 100 percent. Despite the prevailing anger among citizens, Erdoğan remained casual and nonchalant when announcing the details of his new economic policy.
There are several reasons why Erdoğan has remained confident throughout the current economic chaos in Turkey. It seems Erdoğan’s priority is victory in the general election to be held in June 2023, and he plans to use state resources to secure this victory. Erdoğan argues that his ruling Justice and Development Party (AKP) is redesigning global economic policy by challenging the “classic understanding of controlling inflation with high interest rates.” Contrary to what economists say, which is that raising interest rates will drive down prices, Erdoğan believes that lower interest rates will reduce inflation, boost capital flow and kick-start economic growth with investment, employment, production and exports. AKP officials believe that a low-valued Turkish currency attracts foreign investors and that Turkey’s exports will increase. However, Turkey lacks natural resources and raw materials and is dependent on imports for its energy needs. The moment the Turkish lira loses value, the price of leading import commodities, such as crude and refined oil, vehicle parts, precious metals, machinery and pharmaceutical products soars. The increase in imports is immediately reflected in the domestic market. Turkey, once among the world’s 10 countries self-sufficient in agriculture, has begun importing dozens of essential food items including meat, sugar, cheese, wheat and rice from other parts of the world. Turkey has recently even imported straw from Switzerland since agricultural production has become increasingly expensive in the country.
Erdoğan proudly announced this week that Turkey exceeded the target of the medium-term program for 2021; that the country’s exports jumped to an all-time high of nearly $225.4 billion (TL 3.03 trillion) in 2021; and that his government was revising Turkey’s 2022 (export) target to $250 billion, according to the pro-government Daily Sabah newspaper. And Turkey’s imports were also up 23.6 percent year-on-year to around $271.4 billion in 2021. Of course, it was not Erdoğan’s new economic policy that helped Turkey’s exports in 2021, but rather that the pandemic hit Turkey’s exports to its major markets of the European Union, the UK and US in 2020.
Former Welfare Party (RP) lawmaker and pro-government Turkish newspaper Yeni Akit writer Şevki Yılmaz exposed Erdoğan’s plans by saying on Tuesday that “the AK Party has to throw [Turkey’s] money [at AKP supporters] before the 2023 elections. We have 700 tons of gold. You say we have this many dollars in the central bank. Are you going to leave it behind for these thieves [future ruling parties]?”
It is clear that the AKP has no new or elaborate economic plans except for selling out Turkey’s state-owned enterprises, natural resources and key ports to foreign investors as the lira loses value and rich Gulf states rush for the opportunity to buy assets at lower prices. The Turkey Wealth Fund (TWF) sold 10 percent of its shares in Borsa Istanbul to the Qatar Investment Authority for $200 million in 2020, and Erdoğan gifted Turkey’s multibillion-dollar national tank and pallet factory to a company jointly run by his associate Ethem Sancak’s BMC group and the Qatari army. Erdoğan’s AKP has privatized Turkey’s key enterprises such as Türk Telecom, PETKiM, TÜPRAŞ, the İzmir and İskenderun ports and the Amasya and Kütahya sugar refineries as well as many other key firms. Main opposition Republican People’s Party (CHP) lawmaker Mahmut Tanal recently claimed that Erdoğan also sold Turkey’s defense contractors Aselsan, Roketsan and Havelsan to Qatari companies.
Clearly Erdoğan can neither stop the rise of inflation nor strengthen the Turkish lira as the lira is currently trading at almost at 14 to the US dollar. Turkey’s autocratic president is presumably feeling cornered and has threatened opposition party leaders over their criticism of his economic policies as well as ordinary Turkish citizens, who are preparing to protest against his government over soaring inflation, according to a report by Bloomberg. CHP leader Kemal Kılıçdaroğlu has accused Erdoğan of trying to incite a civil war as Erdoğan alluded to the use of force and violence against the protestors as he did during a July 15, 2016 coup attempt.
Erdoğan has increased the country’s minimum wage by around 50 percent to 4,250 lira ($310) per month, up from 2,826 lira ($206), following a reduction of the main interest rate to 14 from 15 percent last month, which caused the high rate of inflation. The minimum wage increase, however, seems to be of little benefit to Turkish workers as the cost of living continues to soar.
In the June 2015 election, the AKP experienced its first loss of a parliamentary majority, but Erdoğan managed to control the ensuing chaos. From June to November, several bomb blasts hit Turkish cities, and the opposition blamed the AKP for the violence, but the AKP then secured a victory in a re-run election in November. Similarly, Erdoğan conducted a successful constitutional referendum in April 2017 and a general election in June 2018 under the state of emergency that was declared following the July 2016 coup attempt. Erdoğan has managed to hold on to the reins of power since 2003 despite the many accusations against him including the December 17-23, 2013 corruption cases and serious human rights violations against Kurds and members the Gülen movement as well as war crimes in Libya and Syria. However, it is unlikely that he will successfully manage to subdue the anger of the millions of hungry, poor Turkish citizens during the current economic turmoil.