An innovative economic plan for Turkey under Erdogan's leadership

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The innovative economic plan led by Turkey under the leadership of President Recep Tayyip Erdoğan is an example of a strategy of self-confidence in the economic field. President Erdogan previously announced a new package of reforms, confirming the government's determination to advance the country into the ranks of the top ten. In another context, Erdogan announced a new economic plan to carefully adjust exchange rates and curb inflation, to match the country's economic reality.

The innovative economic steps led by Turkey under the leadership of Erdogan are gaining more praise and confidence, although there is some criticism of them, especially from the opposition parties.

This is Turkey... and this is its local currency in the denomination of 200 liras, which in 2008 was equal to approximately 150 US dollars, but the same denomination today is approximately equal to only $8, 15 years in which the Turkish lira collapsed insanely, and its economy rose at the same time In a crazy way, there are contradictions between a collapsing lira and an economy that is rising. As the text of this article is being written, the Turkish lira is recording its lowest level in years, as one dollar is close to equaling 26 liras.

Is Türkiye really collapsing? Is Erdogan the reason? What about the new economic policies ?

It seems that Simsek finally succeeded in persuading Erdogan in the first economic move of the new Turkish government led by Erdogan, who is elated by his victory in the recent Turkish presidential elections.

The Central Bank of Turkey announced on June 22 that it would raise interest rates to 15%, after it was only 8.5%, a rise that was contrary to the expectations of economists who indicated that the interest rate would reach 21%, hours before that hike... Erdogan said before the parliamentary bloc of the Justice and Development Party, who led by :

"We will continue to work until we make Türkiye among the 10 largest economies in the world"

A statement after which many experts expected that interest would jump and that the value of the dollar would decrease against the Turkish lira, but once again Erdogan surprised everyone with his economic policy, a rise he described as slight and just the beginning of a greater rise in the interest rate, he did not lower the price of the dollar, but the opposite happened, if the value of the lira decreased However, Erdogan's new magic wand sees the opposite. Mehmet Simsik, the new Finance Minister and the man on whom Turkey relies to revive the economy again, said after the Central Bank's decision :

"Türkiye's new economic policies will attract capital and stabilize the lira"

Simsek's talk does not deviate from logic and reality at all. Not as long as raising the interest rate benefits the economies of countries, and then its stability attracts more foreign investments and improves the value of its local currency, as is the case with America, which is the strongest economy in the world.

Let's stop for a minute and tell you how the global economy generally deals with the economy suffering and inflation levels starting to rise.

The government is heading directly to raise the interest rate with the aim of curbing inflation... This theory was adopted by the American economist (Milton Friedman) who won the Nobel Prize for it, in which he says explicitly :

“If interest rates rise, inflation rates will decrease, and if interest rates decrease, inflation rates will inevitably rise”

And that theory in Western countries and capitalist economic systems cannot be discussed, as dozens of countries follow it, including the United States of America, but did Erdogan follow that theory or method? The answer is definitely not, Erdogan took the completely opposite line, and he may have succeeded somewhat, so how that ?

Erdogan declared it explicitly, instead of raising the interest rate, we will reduce its rate until it reaches below 10%, and this will lead to a decrease in inflation.

The reduction policy was actually launched by Erdogan after the end of the Corona crisis, as Erdogan took that step with the start of the recovery of trade and tourism, for fear of the collapse of the economy due to the expected collapse of the currency.

In October of the year 2022, inflation reached its peak when the interest rate reached 10.5%, as inflation in Turkey reached 85%, at that time everyone, without exception, expected that Erdogan's plan had failed and that the collapse of the Turkish economy was only a matter of time, especially since the price of the lira at that time reached 17 Pound against the US dollar, but the war (Russia and Ukraine) may be the opportunity that reached Turkey. With the start of the war, the Middle East in general, including Turkey, took a state of neutrality from the war, as relations with Russia remained on the one hand, and the western front with Ukraine on the one hand At the same time, all the countries of the region tended to implement reconciliations and restore relations between all countries, especially after the end of the Gulf crisis before it. Therefore, Erdogan turned again to the Arab Gulf countries, which by nature do not reject economic cooperation with Turkey.

Since November 2022, specifically when Erdogan shook hands with Egyptian President Abdel Fattah El-Sisi, we have seen an almost stable exchange rate of the lira in Turkey to a very impressive degree, so that some thought that Erdogan closed the country’s stock market, but the fact is that Gulf support for the Turkish economy forced the lira to stabilize its price against the US dollar, as Saudi Arabia and the UAE pumped nearly 10 billion dollars, and then Qatar another 10 billion dollars, which means that the Turkish treasury entered 20 billion dollars before the presidential elections, which helped Erdogan curb inflation and the collapse of the lira, despite the fact that a new decision was taken to reduce the interest rate in April of the year 2023 to 8.5%, but inflation actually decreased to 45%, and the lira was not affected much by that reduction, so Erdogan appeared as if he torpedoed Friedman’s theory, as he reduced the interest rate and with it the inflation rate.

But in fact, at this point, Erdogan knew that he should return to traditional politics, so he left things as they are until the Turkish presidential elections passed, and perhaps that process helped a lot in the success of Erdogan, who promised to improve the economy and stressed that the upcoming and future plans will be very accurate. Indeed, Erdogan restored the old guard in his economic policy when he appointed Mehmet Simsek as Minister of Finance in his new government formation, which he said in his first announcement :

"Turkey will return to raising interest rates again, in order to rein in inflation, which is no longer bearable, and to preserve the competitor's economy."

Today Erdogan has several cards that can help him with Türkiye economically, namely :

The first is : his alliance with the Arabs in general and raising the rate of trade exchange and investment, as Saudi Arabia announced a while ago about investments worth 40 billion dollars that it will sign with Turkish companies with the aim of implementing projects in the Kingdom, and Turkish politicians do not stop their visits to the Gulf countries, including the UAE and Qatar.

Second : The discovery of gas in the Black Sea, which will reduce the burden of energy bills on the state.

Third : Turkey is an important player in the negotiations in the (Russian-Ukrainian) war between Russia and the West, and an important corridor for energy in the world.

All of these papers that were mentioned above are considered important papers for Erdogan and Turkey, which makes the process of preventing any collapse linked politically in the first place and then economically, and thus the Turkish economy has overcome the most difficult obstacle represented by inflation. After the decision to raise the interest rate, Simsik confirmed :

"The stability of the lira against the dollar is inevitable, and that the government will start more serious measures to stop internal inflation represented by raising prices from merchants and property owners."

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