The fact that Turkey hits the largest current account deficit since 2014 was maybe the most important item on yesterday’s agenda, among other things. Although we console ourselves by declaring at every chance that Turkish exports hit record highs, I’ve mentioned many times in my previous reports that imports too has been growing at fast pace thus Turkey was breaking C/A records.
As I have been studying and writing papers on behavioural economics for a very long time now, it’s very easy for me to see that, when it’s time to diagnose and fix the problem, those holding key positions at economic administration only focus on a couple of positive developments, which they think they might prove them right, meanwhile choosing to ignore all other negative things. Do you know what it looks like? It’s like when we look at clouds and see faces or inanimate objects.
I told you maybe a million times that an Administration, that is wrongly convinced to reduce the foreign trade deficit through trade barriers and extra duties levied on imported goods, is always doomed to fail. But, whenever I mount the same argument, the fierce advocates or these practices actually discuss nothing except trying to proving themselves right by putting forward their classic argument: Turkish exports hit record highs!
I really don’t wish to offend them or break their hearts; nevertheless I must say that, as of yesterday, Turkey’s current account deficit stands at $51 billion. And it’s only for the sake of $1-2 billion rise in exports. That is the sad truth. I wish the bigger picture were more cheerful. Unfortunately, inflation and cost of living that are continuously increasing because of additional import taxes, struggling businesses due to non-tariff barriers, people losing their jobs because of low profitability is the price Turkey had to pay.
I mean no offense but whenever I fired criticism about the economic policy of Turkey for the past four years, I was told by some business people, “If people want imported products, they should pay for it!”.
I’d like to ask them, “How can you explain the fact that Turkey was running very large current accounts deficit when oil prices remained calm?”
“Personal benefit often conflicts with national benefit…”
I’d like to take it one step further and ask again, “What do you think about the high cost of living which mainly exists so your businesses can survive, even though you don’t have the capacity to meet demand in Turkey?” Apparently, they miss one key detail: Domestic manufacturing should have been made competitive instead of making imports more expensive. However, these businesses didn’t ask for low-cost production when they were beating a path to Ankara’s door. On the contrary, they asked for higher cost imports, now causing them to fall behind many global competitors.
For the last few decades in Turkey, the majority of Turkish business world has never demanded public sector downsizing, reasonable taxation, and low-cost production; because, they were happy about the public sector growing. The more business opportunities they had, the more Government grew. Today, they are begging Ankara literally for an “extension of expiration date” because they can’t handle competitive production.
Only a few businesses were able to take significant steps towards becoming the “company of the future” through their skilful performance in branding, design, innovation and R&D.
“We can’t compete! Make all imported goods more expensive!” There’s never been and never will be an economy that has been able to survive by this motto. Despite all that, Government sticks to these policies causing high inflation, wider foreign and current account deficits, for some reason. I would be ashamed but apparently no one is.