Best of Luck is said this way…

When you make a decision and people say "best of luck," it indicates their acceptance of that decision. However, if they say "may it be for the best," they are expressing a meaningful reaction to a decision that they do not find to be particularly correct. The latest Medium Term Program (MTP) was met with this response by 99% of Turkey.

This MTP has received more criticism than the previous economic administrations which were described as "far from rationality." Meanwhile, we also observed that the export targets have been reduced by a total of $13 billion from the previous MTP. Let me put it simply what this means:

Many of the MTP targets are not tasks that economic administrations can directly achieve. Only public expenditures and the budget deficit as a percentage of national income are under the government’s control. Besides that, the current account deficit is influenced by global developments and costs, and the growth target is tied to economic activity. No government ever states, "We have succeeded in reducing growth," nor does it aim for such a target. For this reason, it is being softened as "rebalancing."

Furthermore, inflation decreases with pricing behaviors, supply-demand balance, public expenditures, monetary policy, and the coordination of economic actors. It is not possible to achieve this solely through interest rate policy. Meanwhile, the unrealistic level of exchange rates and the effort to maintain such a level is inherently unsustainable. The fact that the dollar exchange rate announced in the previous MTP, which was stated to be "42 TL," was not even allowed indicates that the economic administration is struggling significantly in combating inflation.

Honestly, while zero growth followed by negative growth is expected in the third and fourth quarters of 2024, I am curious how there will be a move in 2025 that will meet the 4% target. Meanwhile, how will the steps to achieve the 4% target allow inflation to drop to 17.5%? All of these diminish the credibility of the MTP.

In fact, I have always considered the MTP studies important. However, it has now strayed away from guiding the private sector. No one believes in the targets anymore. For example, despite the wrong decisions of the economic administrations, the export target is always met. In fact, it even surpasses it. For the first time in a new MTP, I see an export figure that has been revised downward compared to the previous one. Instead of discussing what this means, I believe we should directly ask the economic administration.

I cannot recall another period where those engaged in foreign currency-earning activities, including universities, have been so undermined by economic administrations. Still, acknowledging that the MTP is a statement of intent, it appears that efforts will be made for the dollar and euro to remain the cheapest commodities in our country, that Turkey will continue to be more expensive than Europe, and that traveling abroad or acquiring assets from abroad will persist while there are opportunities.

It seems unnecessary to be a fortune teller to predict that the prescription favoring consumers and those trying to acquire assets will continue for a while longer, but its end will be sooner than expected. Most likely, the single-digit inflation target will not be achieved within the specified timeframe because there will be political interference with the economic cooling.

Meanwhile, the last credit rating increase, which was sidelined, was a strange anomaly in itself. They have defined the opposing parties to the program as "interest groups." They have almost indicated all of Turkey, from citizens to industrialists, traders to retirees. However, those who benefit from this prescription are the real interest groups. This is how we can more easily understand how strange of a process we are in.

Prof. Alkin