An independent inflation research group has said in an analysis that the appearance of Turkey’s economy is “really frightening,” mainly due to the government’s misapplications in monetary and fiscal policy, local media reported over the weekend.
Turkey’s Inflation Research Group (ENAG), which was established in İstanbul by a group of academics and researchers in 2020 to track inflation in the country, published an economic analysis of 2022 on Saturday, focusing on the applications in the ruling Justice and Development Party (AKP)’s monetary and fiscal policy and growth figures.
According to the analysis, weak growth and institutional weakening combined with the misapplications in monetary and fiscal policy have reduced the efficiency of resource allocation in Turkey’s economy, leading to the “disorganized appearance” of today, which is described as “really frightening.”
ENAG stated that Turkey has had weak economic growth performance since 2018, and the base effect aside, the country has always grown below its potential.
The analysis also showed that the biggest problem in Turkey’s economy in 2022 was the high rate of price increases and that high inflation reduced revenues as well as purchasing power.
The research group further said that the situation in the financial markets is unclear since alternative investment instruments disappeared due to the “interest-setting approach.”
Turkey’s economy has been in turmoil since President Recep Tayyip Erdoğan launched an unusual experiment in September 2021 to fight inflation by lowering borrowing costs.
Conventional economic theory embraced by almost every other big nation pursues the exact opposite approach.
The country’s inflation, which had risen steadily since reaching a low of 16.6 percent in May 2021, slowed for a second month in December after previously hitting a two-decade high.
The troubled economy has turned into a major stumbling block on Erdoğan’s path to a third decade in power in a presidential election slated for May.
ENAG gained prominence after the inflation figures found by the group differed significantly from the official inflation data announced by the Turkish Statistical Institute (TurkStat). ENAG’s inflation figures are sometimes twice as high as those announced by TurkStat. Hence, the group is accused by the government of playing with the inflation numbers to discredit TurkStat and paint a gloomy picture of the condition of the Turkish economy.
The head of TurkStat has been replaced four times by Erdoğan since April 2019, leading to claims that Erdoğan was not pleased with the TurkStat figures when they were higher than his expectations.
Over the past several years, Turkey has been suffering from backsliding in its economy, with high inflation and unemployment as well as a poor human rights record. Erdoğan is criticized for mishandling the economy, emptying the state’s coffers and establishing one-man rule in the country where dissent is suppressed and opponents are jailed on politically motivated charges.