Since the coronavirus panic begun in Turkey, everyone has been wondering why Turkey avoided providing a large economic package while other countries’ governments are giving huge financial support to markets.
For me, there is a simple explanation for this, but I need to get into some details:
First of all, Turkey had to go through many economic challenges over the past years and it would not be fair to blame only the government for these mistakes. Economy’s opinion leaders in Turkey, whose businesses have grown quite rapidly in a short period time, failed to provide the government a specific vision so that economy can keep going with the right economic model. Instead of bringing in something new, something outstanding, they chose ordinary success. They were recognised as successful businesspeople by international community whereas they should have been known for their groundbreaking contributions. They were invited to big events as people who spent the most money on a specific brand, or as people who bought the most airplanes and cars and sold them most rapidly. Every leader and their team who served in government so far in Turkey have always found a way to keep Turkish business people busy in some way, realizing their vanity and their meaningless, silly competition with each other.
Most of the top companies in Turkish industry demanded protection against foreign competition in every sector you may think of. Let alone the fact that they wanted the government impose high import duties to provide protection against foreign competitors, they aimed at becoming the only buyer and the only seller, even declining an oligopoly in their own sector.
They had thousands of workers work for them in their factories equipped with a low level of technology, while using their reputation as the largest employers as a political power. This is the reason why government-business world relations has always been based on the principle of “give and take”, not on a “shared vision”. Whenever Turkish private sector raised its voice against economic troubles, the government in Turkey would either shut them up with easy taxation or provide them with incentives as hush money if you like. In every era,
Governments had always helped people from their entourage become rich so as to keep them close as a lifesaver, offering them first any public bids or tenders.
In short, governments’ job is not an easy when especially when business world is seeking privilege instead of fair competition. It’s quite difficult to engage in new projects or design creative growth models with business people who are unwilling to compete under equal conditions and constantly threaten governments with their large-scale businesses.
Do not rely on ‘Things will get better sooner or later’
As I keep listening to market actors with considerable amount of business experience, it seems quite plausible to me that huge economic support packages offered by central banks and governments will eventually help stocks, bonds, precious metals, and oil rise again.
Projecting that some of these funds could eventually flow into Turkey, setting the stocks in motion, even encouraging global firms shift some of their manufacturing and procurement to Turkey, Turkish government might be thinking that Turkey can overcome this issue without getting into external and too much panic.
And the economy administrators foreseeing a fund flow into Turkey for the reasons mentioned above despite the fact that they believe CBRT must continue to cut rates might be thinking that there’s no need to worry since things will get better on their own.
Obviously, these thoughts are taking shape around the following scenario: If COVID-19 reaches peak at the end of this month or in the first two months of May followed by a sharp drop. The castle of forecasts built upon this positive scenario will obviously collapse if the pandemic takes longer to reach its peak. If this happens, we’ll have to come up with a different scenario.
As I mentioned in my previous reports; we will see that the IMF’s report drawn up under the current circumstances was actually more negative than it should be. So, in this article, my aim was to explain to you the reasons behind this approach which is considered to be “too sloppy” by others yet “too cautious” by me, and the scenario associated with it.