Black box in the economy on the 22nd anniversary of the AKP

Today is August 14. Today is the 22nd anniversary of the founding of the AKP.

Turkey is going through one of the most difficult economic periods in its history under the AKP government, which came to power in November 2002 and has been in power for almost 21 years without interruption.

Especially in the last 5 years, when the presidential system of rule was introduced, Turkey faced currency crises and high inflation.

HIGH INFLATION AND FOOD PROBLEM

Although Turkstat’s official inflation, which most of the public does not trust, was 47.8 percent in July, this rate was calculated at 112.9 percent by the Inflation Research Group (ENAG).

Official inflation, which reached a 24-year high of 85.5 percent in October 2022, is expected to approach these levels again in the coming months.

Calculating annual food inflation at 70.4 percent as of July, Türk-İş announced that the monthly food expenditure required for a family of four to be healthy, balanced and adequately fed is TL 11,658.10 in July (starvation limit).

This figure has exceeded 11,402 TL, which is the minimum wage increased from the first month.

According to Türk-İş, the total amount of spending on food and other mandatory monthly expenses for clothing, housing (rent, electricity, water, fuel), transportation, education, health and similar needs (poverty limit) is 37,974.10 TL. to.

When 2 people in a 4-person household earn the minimum wage, this figure barely corresponds to 60 percent of the poverty line.

It is estimated that 80 percent of Turkey’s population lives below the poverty line announced by Türk-İş.

CURRENCY CRISIS: INCREDIBLE LOSSES IN VALUE IN TL

The Turkish economy has faced frequent currency crises in recent years. The Turkish lira has always been at the top of the list of the currencies that have lost the most value in the world in recent years.

The dollar exchange rate, which began 2018 at the level of 3.75, is today above 27.

Exchange rates, which were maintained with reserve sales, transaction restrictions, exchange-protected deposits (KKM) and regulations mandating the transition of foreign currency to TL before the May 2023 elections, were “liberated” gradually after the elections.

Due to the high current account deficit, low reserves and high inflation, the depreciation of the TL and the rise in the dollar exchange rate are expected to continue in the coming months.

EXTERNAL DEBT, CURRENT DEFICIT AND RESERVE PROBLEM

The interest rate and exchange rate policy implemented before the elections caused the current account deficit to explode.

Although there was a surplus in June thanks to tourism receipts, the current account balance showed a large deficit of 36.8 billion dollars in the first half of 2023. Credit growth and imports
It is expected to increase in July despite the restriction measures.

In an environment of deeply negative real interest rates, high inflation and the expectation of an increase in the dollar rate fuel imports, especially gold and automobiles.

Although increased after the elections, the Central Bank’s net reserve (CBRT) excluding the swap remains close to historically low levels at -49.1 billion dollars.

In addition, there is an external debt of approximately 45 billion dollars in swap and deposit accounts on the CBRT balance sheet.

As of March 31, Turkey’s foreign debt stands at a record level of $476 billion. Short-term debt with a maturity of 1 year or less is also at an all-time high of $207.4 billion.

HOUSING CRISIS

Turkey is facing a real estate crisis that has deepened in recent years, along with currency and inflation crises.

With housing becoming an investment tool for domestic and foreign capital, millions of citizens faced a housing crisis and landlords and tenants almost collided.

While wealthy foreigners acquired citizenship by buying a home, Turkish citizens could not access housing.

The president of the Real Estate Law Association (GHD), lawyer Ali Güvenç Kiraz, announced that while the demands for rental eviction were 22 thousand in all of 2022, they reached 47 thousand in the first 6 months of this year.

In May 2023, the average rate of increase in house prices in Turkey was 103.6%. The cumulative rate of increase in house prices in the last three years has reached 546 percent.

According to CBRT figures, the average price of a 100 square meter house increased to TL 2,357,000 in Turkey and TL 3,600,000 in Istanbul.

YETIS, OH ARAB!

The government seeks a solution to get out of the economic crisis in currencies of the Arab kingdoms of the Gulf.

Many government representatives, especially President Tayyip Erdoğan and the economic administration, frequently visit the Gulf countries and ask them to send money to Turkey.

Finally, Erdogan organized a tour last month of Saudi Arabia, the United Arab Emirates and Qatar and made several investment deals.

Due to the shortage of foreign exchange, many strategic assets are planned to be sold to foreigners, especially Arabs.

Despite the reactions and the real estate crisis, the practice of granting citizenship in exchange for the purchase of real estate continues.