Three striking scenarios regarding the results of the Presidential and Parliamentary elections

I went to the meeting of the Economic Research Forum, which was created in partnership with Koç University and TÜSİAD. Between them Selva Demiralp, Hakan Kara, Cevdet Akcay Names such as academia and the economic institutions they have worked with, who are known for their prestige, are panelists, and when the subject is the Turkish economy in 2023, my motivation to go has increased. The opening speech of the meeting was delivered by the President of TÜSİAD. Orhan Turan did. In his speech, separating 2023 as a pre- and post-election period, he also drew attention to the reputation problem of institutions:

“In the second century of our Republic, an economy model that has difficulties in creating welfare and employment, institutions that are stuck with low-tech products, low added value, high dependence on imports, and having quality and reputation problems cannot support the competitive power of our country.

Then the vice president Murat Ozyegin He pointed out that the growth figures in the world will be the lowest in the last 40 years, that the USA may somehow overcome the recession early, but that the European Union countries will be affected. He mentioned that this situation does not help Turkey, especially in terms of exports.

Let’s come to the common points of the panelists who spoke at the meeting:

-Inflation in the world is at its highest levels in recent years. Central banks around the world are raising interest rates to solve this. This will cause a recession. The US will seem to get through this more gently, while the European Union will feel the recession more severely. Since it is Turkey’s most important contact center in exports, the impact will also negatively affect Turkey.

-There are risks such as the increase in the tension between China and Taiwan in the coming year, and the prolongation and spread of the war that started with the Russian invasion.

2021-2024 2023 will be the most difficult year for the world.

-Inflation in Turkey will increase again in the second half of the year, they expect the year to be in the range of 35-50 percent (varying). But the bad thing is that it will take two or three years for the under-20s again.

No matter who comes after the election, growth will slow down. A growth of more than 3% does not seem possible.

I think the scenario and expectations of Hakan Kara, who has held important positions in the Central Bank for a long time, will be eye-opening for everyone. Hakan Kara thinks:

If the President and the Assembly change:

– Interest rates will increase significantly.

-Growth will slow down in 2023, 3rd and 4th quarters, then pick up.

Inflation will remain in the 15-20 percent range in 2023.

There will be an increase in interest rates. Don’t ask what percent it will be. This question comes up a lot because it changes every day. Every day, such a regulation emerges that the level at which those interest rates should rise is changing. Therefore, I will not specify a level. But interest rates will rise. There will be a serious slowdown in growth in the short term. Because the current regulations and regulations have made the interest very costly. Therefore, there will be a serious slowdown in the short term. But then, with confidence coming back, a quick recovery can happen after a few quarters. It may take a year or a year and a half, but we don’t know exactly that.

If the President and the Assembly do not change:

Credit, currency and price controls.

– Gradual devaluation.

-Inflation will remain in the range of 25-40.

– Potential sub-growth for a long time.

If the current administration continues, it is likely that what has been done so far will be more formalized and continued, for example, the Central Bank Law will be changed, the decision no. 32 will be changed, the management of capital flows will be done in a more formal way, and the central government will be much more effective in the economy, it will be possible to obtain credit from a single center. It seems that there will be a move towards a more controlled system where the exchange rate is distributed.

If the parliament changes, the president does not change:

Ycombination of the above two scenarios.

This scenario is a little more difficult. Because there may be some volatility in the short term in a somewhat chaotic environment, but in the end, it probably won’t last long. Because a fragmented structure is not sustainable, elections will have to be held again. I expect a more moderate and partial normalization in policies and a more moderate financial pressure, as I think that a compromise will be sought in that process.

Hakan Kara says these things. As for reserves, he sees success:

Of course, the reserve quality of the Central Bank is very poor, but it is necessary to pay attention to this. In other words, in a world where the current account deficit is so high, they still managed to accumulate reserves, so this should be appreciated somehow.”

TÜSİAD Chief Economist Gizem Oztok Altinsac and those who think that ‘hard days will be experienced’. He says:

“It is seriously difficult to answer the question of when we will normalize. Because the global environment must also support this. Turkey is acting together with the world and the world is not in our favor in 2023. The funding conditions are not in our favour, and Turkey is actually pretending to be in a way, that is to say, in a controlled manner. exchange rate policy. Because the existing policy actually distracts you from your goals. So what is it? Controlling inflation, stabilizing the exchange rate. However, how do we stabilize the exchange rate? The Central Bank is constantly spending foreign currency for this. It is not enough, look, we used to spend foreign currency and it was enough. Right now that is not enough.

The reason why the Central Bank has emerged with such intense regulation today is due to the inability to control the system. Unless you can control it, you go to stricter practices. And at the end of the day, your financial system wears out. However, when you go to many years ago, compared to todayThere was an extremely healthy financial system in Turkey. When it is so intrusive, pricing behaviors and pricing movements deteriorate and take you away from where you want to go. This is the reality of Turkey… 2013-14-15In the period after ‘, we all said as economists that this system is unsustainable. How did we keep up? Funding in some way, by finding resources or by burning the existing reserve. Today it’s out of stock. It’s happening right now with more intense regulation. Let’s even go one step further. For example, there is a need to intervene in rental pricing, food pricing, retail pricing. These will increase. And at the end of the day, that break happens. But if you ask me, when will the normalization happen; The answer to this is not 2023, but in terms of the Turkish economy. As TÜSİAD, we expect a growth of around 3.5-4% in 2023. On the inflation side, we think that we will end the year with an inflation in the 45-50% band. Frankly, we do not expect any differentiating scenarios in TL, at least until the election, as it continues gradually but in a controlled way.

Cevdet Akçay, on the other hand, sees the next two years difficult, no matter who wins:

“I think Turkey has two difficult years regardless of the government. It is difficult even if the government changes. It just seems to me that the nature of the difficulty changes a little bit. If the government remains, a difficult situation will continue over wrong prices and eventually a radical correction will come. It will come on the interest side or on the currency side. I think it is inevitable. If the government changes, there is a difficult situation again. So there is no escape from the difficulty, let me tell you that once everyone gets used to it. Two years of Turkey’s troubles. That’s for sure. Because you can’t get out of it that easily. Change. If the prices come to the right places, if the signals improve over the right prices, then we can read what the results of the policies we have put into practice through the signals in the prices, which is the whole purpose of the mechanism called price, we will get the job done after a while, but I think it will not be easy. In my opinion, it will not be easy. “

The episode in which Selva Demiralp, whose writings and comments I learned closely, told about “obstacles in front of monetary policy in the normalization period and our duties in society for a successful disinflation policy” was very mind-opening. The meetings of the Central Bank Governor of the time, Süreyya Serdengeçti in 2001, with different segments of the society, reminded the struggle that was reported in the media.

When finishing…

Turkey was dragged into an economic disaster with policies that have no precedent in the world, implemented by a single man saying ‘I know’. As respected academics have pointed out, we will experience very difficult days for at least two years. And the bill will be especially for the labor sector, for retirement. The majority of society has been severely injured by the hardship of one man.