The New Normal: Bankruptcy

The New Normal: Bankruptcy
 
According to a report by an international organisation, a significant number of companies in Turkey will face bankruptcy in 2024. And the reasons for are crystal clear.
 
The Government’s economic policy is not working, especially for the private sector. There are no positive expectations for 2025 and 2026. International financial institutions say that if Turkey will not be able to reduce inflation unless it experiences very low growth for another two years. Yes, we have multiple challenges ahead of us, and most problematic of them all are companies’ financing and repayment problems, low profit, decreasing rate of employment, and unemployed people struggling with debt.  
 
There is no denying that these will affect us all. Previous economic administrators  created these problems as side effects, as a result of the decisions they had made. Now, the current ones are knowingly causing them. Somehow, they are convinced that their method will make inflation go away. And their method is to push the economic growth down to zero, bring economic activities to a standstill hence put a stop to price increases.

However, the Central Bank is failing to tighten money as it should be due to excessive liquidity, which is the result of excessive government spending and interest rates. At this rate, companies will go bankrupt, but inflation will not drop to the intended level.
I do not think that the Government will tolerate low growth rates for long, which is not the solution anyway.
 
So, given the circumstances, it is unlikely that the Central Bank will cut its policy rate in September. However, we shall definitely see a rate cut in October or November.
I do not think that Central Banks will be able to resist the pressure, particularly in this conjuncture where global markets are falling. Unfortunately, Turkey was caught unprepared by the global financial turbulence.

Prof. Alkin