What will happen to the economy on May 15? Korkut Boratav said two scenarios
Türkiye will go to the polls in just 12 days. As the historic elections approach, the scenarios that can be experienced in the economy after May 14 are increasingly on the agenda.
One of Turkey’s leading economists, Prof. Dr. Korkut Boratav told SÖZCÜ that they expect two different scenarios to be experienced in the Turkish economy, including the continuation of the current government and the victory of the opposition.
IF THE CURRENT POWER CONTINUES…
First of all, referring to the scenario of the continuation of the current power, Boratav said: “They will try to maintain their current complex and turbulent policies, but these policies cannot be sustained.”
By stating that the short-term external debt is 196 billion dollars, the current account deficit for the last twelve months is 55.4 billion dollars, if the high rate of January-February is maintained, the deficit External financing will exceed 100 billion dollars in 2023 and a External financing needs of more than 300 billion dollars will arise, so it is not possible to maintain current policies.
Claiming that if the current government wins both the presidential election and a parliamentary majority, it can go to the IMF with an attempt to obtain a large amount of credit at the point where current policies cannot be sustained and the balance of payments crisis it’s running. the agenda, noting that the IMF can also give the desired loan with very strict austerity conditions.
IF THE NATIONAL ALLIANCE WINS…
Secondly, referring to the scenario of the Alliance of Nations winning the presidential elections, Boratav warned that the text of the memorandum of this alliance includes a stabilization program in the neoliberal sense, which includes raising interest rates, relaxing the rate of change and eliminate macroprudential measures that suppress the exchange rate.
Boratav said: “The exchange rate has been put under so much pressure that very abrupt liberalization will cause a rapid increase in exchange rates.”
Stating that there are local elections in March 2024 and that those elections are also important to ensure the exit of the current government, Boratav said that steps that would lead the Turkish economy to stagnation and reduce employment should be avoided, such as the fiscal rule that plans to reduce public spending.
Stating that the current pressure on the banks is unsustainable and that if the banks are released after the elections, interest rates can be raised and equilibrium can be reached, Boratav asserted that the most irrational parts of the current policy, which includes Policies such as commission penalties and verbal exchange controls can be expected to be removed.
Stating that there has recently been a pro-capital distributional shock in Turkey and that the people are in a severe livelihood crisis, Boratav said: “It is not possible for the workers and poor of Turkey to manage a new economic contraction. and a new wave of inflation that will be triggered by the explosion of exchange rates.”
HOT MONEY WARNING
Affirming the Nation Alliance’s expectations that there will be a rapid influx of foreign capital in the short term if they come to power, Boratav said the spokesman for the world’s largest fund company, US Blackrock, told the Economy newspaper, “The positioning in front of international investors is weak and there is not much that is going to change in the short term. We do not see many signs,” he said in the statement.
Boratav said: “Specific capital can come, but wait for rates to rise, then it will come. The important thing is the shock that the rapid rise in exchange rates will generate, and that should not happen, so there should be no sudden liberalization.