At the Istanbul Summit, where the Russian-Ukrainian sides met last week, we saw a glimpse for the ease of tensions. According to strategy experts, Turkey has made quite rational moves so far. Perhaps these moves will help strengthen our new strategy we have established in the Eastern Mediterranean.
From the disputed islets in the Aegean to the continental shelf, from the Syrian issue to Libya, I am glad to see that Turkey’s reconciling also deterrent power has stood out amidst the circumstances that have worsened and that have improved from time to time. Obviously, these developments alone will not be enough to help improve the economic parameters.
The current reserves of the CBRT are still at a matter of concern, while the structural gap between the current account deficit and growth remains intact. The energy bills in Turkey have doubled since the last year, there is a severe incompatibility between inflation, cost of living and wages. We see that people are still turning to foreign currency despite the recently introduced Foreign Exchange Protected Deposit.
“The Puzzle of Domestic Politics”
Unquestionably, the uncertainties in domestic politics have a significant impact on the economy. People believe that the solutions implemented so far will hardly bring long-term satisfaction, that the government will continue to make the same promises until the elections, but they also have big expectations that the leaders of Turkey will eventually see the reality. People say, “The government knows it too – that staying this course is not sustainable”.
It’s comforting for people to think that the government does not really believe either in discourses like “We rendered the policy rate no longer significant” or “Everything is going great!”. The fact that the opposition parties stayed away from diplomatic issues in recent days and that they did not talk about the economy differently than everyone knows, did not improve people’s trust in the government, but prevented it from further declining. The decrease in exchange rates was also important in this regard. However, it looks like, after the Istanbul Chamber of Commerce’s Cost of Living Index announced on Friday, the CPI rates that will be released today will also bother us. Unnecessary insistence on the current monetary policy may cost Turkish economy greatly.
Turkey will always remain in the risk zone unless it fixes its vulnerabilities, which need to be taken seriously and handled in a planned manner.