There is something fundamentally wrong about this
Some reports issued by international financial institutions make me question whether they analyse the Turkish economy correctly or not. The analysts working for these institutions must be in contact with their colleagues in Türkiye because their statements such as, “Raising interest rates to 45% will be enough. You may cut them in summer” seems like an exact replica of what our economic institutions say.
There are several reasons behind the support for the Central Bank both in Türkiye and abroad, despite the negative public opinion.
– The former Central Bank management was not in such close contact with the international financial institutions and it was not possible for an inside source to give a hint about a future CBRT decision. So, as the current management maintains an extremely open communication with these institutions compared to previous managements, the forecasts of analysts from both national and international banks have been quite spot-on recently. Because they are reselling the information they receive from inside sources. This routine helps the institutions replenish their reputation among their customers and allows the same for the Central Bank in the market and public-eye.
– The Central Bank is praised for not limiting money movements like the previous management did. But what the CBRT essentially does is to help reduce the borrowing costs of large businesses, including media corporations which happen to finance themselves from abroad. Business magnates in Türkiye want Erkan and her team to remain in office.
It seems that the current economic team, which was backed by liberal economists when they first came to office, lost credibility after miscommunication incidents and their unsuccessful meetings with the private sector representatives. Therefore, I think we could presume that things do not go well for the team and the supposition that it might be replaced suddenly with a new one grows increasingly stronger.
However, I do not expect that such sudden change to take place anytime soon. Even if it does, it is unlikely that it will have a permanent negative impact on exchange rates and markets. But the downside would be that, in the eyes of the world, the unstable outlook for Turkish economy would continue, which, in fact, could be improved by appointing the right people to the vacated seats at the Central Bank.
But, I suppose favouritism will be preferred over merit as usual, I’m afraid. People who would have succeeded elsewhere keep getting appointed to the key positions in the system and they are asked to perform extremely difficult tasks they are unfamiliar with or they do not feel competent enough to do it. More interestingly, there are so many people eager to assume jobs that are outside their skills. Overeager amateurs love to dive head-first into unfamiliar challenges. It’s a shame for both the country and for them.
