What awaits Turkey in 2023..



Next year, risks will multiply for Turkey. Let’s take a quick look at some of these risks:


The biggest risk for Turkey would be the possibility of the Russia-Ukraine conflict reaching an alarming level. If Putin is not offered the chance for an honourable withdrawal, we may as well see Russia invading all of Ukraine.

At a conference held at Topkapı University last month, international guest speakers said that such an operation would be challenging in terms of logistics, nevertheless Turkey should be alert, both theoretically and diplomatically.


Russia’s possible occupation of the whole of Ukraine will lead a second cold war period. I remember very well the devastating effects of the first cold war, namely constantly fluctuating inflation, and growth rates, on both country politics and diplomacy. The World should not ignore this risk and watch it very carefully so as to be protected from inevitable consequences.


Another major risk is the possibility that Turkey’s credit rating might be pushed down to “C” grade. Although there is a slight improvement in Turkey’s relations with the US, it is well known that credit rating agencies can often take diplomatic and political positions. I would like to remind you that since we decided to give up the F-35s and buy the F-16s with our remaining balance, there has been no progress whatsoever in our credit rating, on the contrary, it has come closer to the “C” grade.


The third risk factor that Tukey must watch carefully is its export performance. If the orders from the European Union continue to decline further, the current account deficit would put more pressure on exchange rates Therefore, Turkey needs to pay attention to exports, which used to hit record high levels, and make its future plans accordingly. In 2023, I also expect energy and commodity prices to remain high and volatile. So I’m telling you again, next year Turkey will have to be careful as possible.


The fourth major risk that Turkey will face is the government budget deficit. Although the real interest rates are currently low, banks will be allowed to offer only a limited amount of credit, which was made possible by the CBRT in the first place by introducing more money to circulation. We also need to consider the inflationary side effects of this expansionary monetary policy. If Turkey continues to run primary deficit, it may unfortunately become deprived of net borrowing and fall into a spiral of debt.


“Upcoming Elections and Scenarios..”


Clearly, such a situation will have a negative impact on both Turkey’s credit rating, exchange rates and other parameters. Accordingly, the government will need to take the necessary measure to keep the public balance within reasonable margins.


The fifth risk factor for Turkey will obviously be the political environment while entering the election process. This election will probably be one of the most important elections in modern day Turkey. I read the post-election scenarios by some foreign institutions, according to which, the world thinks if the situation in Turkey does not change even after the elections, things will become much worse for the country. Although I do not give much credit to every report or scenario I read, I think we will need to be very careful over the next few months in terms of perception management.


Considering all these risks, my advice to all business owners operating in sectors with increasing demand under conjunctural circumstances is to run thorough analyses and examine borrowing opportunities in detail before investing in capacity building.


The fact that the increasing government spending drives down private sector spending, knowns as crowding out, hence the debt ratio of the private sector has increased at least thrice is a clear warning for investors and depositors that they should think twice before engaging their money in an economy that holds significant risks.