The Current Tense Situation in Turkish Economy is a Vivid Example of Government's Misfunctioning

• 09.11.2018, 17:35
• Lilia Amirkhanyan
•  Region,  "Insight" Analytical Center

In neighboring Turkey, the economy is on the verge of a crisis. The depreciated Turkish currency for a long time needed a co-ordinated financial intermediation, which is not yet available. And the fact that the Turkish state does not show proper support to its own financial system is conditioned by the causal link between the current situation and the causes of the decline in lira.

The factors contributing to the downfall of lira are the overstatement of the external debt of $460 billion, including the relatively large short-term liabilities, the ever-increasing rate of inflation in the country, causing great damage to not just the Turkish people, but also the effectiveness of the foreign capital outflow in the country. In addition, the international community's lack of trust towards Turkish authorities, which also has a negative impact on lira's exchange rate.

In the latter case, the problem is not only in the aggressive statements by Turkish President Recep Tayyip Erdoğan in regard to this or that partner or an international player, or his sole direct management of the country, but also the non-use of state regulatory mechanisms in the face of the economic situation in the country. The point is, in particular, in the monetary policy implemented by Central Banks in case of free economies. Meanwhile here the problem is the consequence of the self-centered policy and the resulting state appointments. It is known that the head of Turkish CB is Erdogan's son-in-law, that is, CB is also deprived of independence. And the Central Bank can raise the nominal interest rate, in other words to define the value of the money, while Erdoğan has long been known for his interest in raising interest rates. The reason is the ambitious aspiration of the country's leader to show an ever-increasing GDP in his ''sultan's position''.

The illusions of the ''Almighty Country'' are also a reason for the deterioration of relations with the EU and the United States, which is an additional consequence of the decline in confidence in the Turkish economy by the international markets, the use of US sanctions against Turkish iron and aluminum.
It is obvious that the continuation of such a policy will put the Turkish economy in a worse situation and even the most effective means of withdrawing the country from it might not work.