Türkiye in critical turn with a great an agreement of surrounding speculation future of that it economy After the presidential runoff on Sunday. comprehensive question on On everyone’s mind looms: woe to Türkiye remain steadfast in its commitment b current Economic policies centered around low interest rates for fuel growth?
It seems that the answer is definitely “yes”, according to current President Recep Tayyip Erdogan, who Türkiye ruled for 20 years and is well-positioned to extend it into a third decade after the fall just short of victory in the first round of polling on May 14th.
His rival, leader Kemal Kilicdaroglu of Turkish main Opposition Republican People’s Party and party six-party The Nation Alliance vows the opposite, having campaigned on Promise to back out current monetary policies.
In the heart of The controversy lies in Türkiye battle against High inflation, which undermined the purchase power of Its citizens, a sharp drop in value in Turkish lira. In response, the government adopted a strategy based on on Reduce borrowing costs combat rising Prices and economic stimulation growth.
Turkish is also Trying to get out of the traces of Destructive earthquakes that hit the southeast of the country region in early February.
Rationale behind The economic government program It is local stimulation demandthus promoting investment drive economic growth. In addition, they insist that the programa statement in 2021, maybe help Chronic heart current account deficit into surplus.
Supporters of This approach argues that lower interest rates can stimulate economic activity by encouraging borrowing for investment and consumption, leading to higher growth and work creation.
They assert that traditional cash policy tools such as raising interest rates failed to treat Türkiye unique economic challenges.
in the layout with This Turkocentric approach bank Strongly reduced interest rates to reduce borrowing costs for Companies and individuals encourage spending. the policy rateknown b oneRepo week rateit was cut from 19% in mid-2021 to 9% by early 2023.
monetary authority last Cut the standard policy rate by another 50 basis points To provide stimulation after the catastrophic tremors that killed on February 6th more from 50,000 people And caused Widespread destruction across 11 provinces. The “calculated” reduction was deemed to be “appropriate” for support the recovery.
Erdogan promised that spend All that is necessary to rebuild the earthquake affected areas. At each groundbreaking ceremony, he asserts that only his government Can rebuild He lives after the disaster.
In addition to these efforts, the president has increased public- Sectoral wages, enhanced pensions, and early retirement allowance for millionsProvide support for Electricity, gas and wiped out some families debt.
Center bank on On Thursday I keep on policy rate by 8.5% for Third month in a row. statement that followed decision He said, “It became even more It is important to keep it financial supportive conditions of maintain growth Paid in Industrial production and the positive trend in employment.”
He. She also Primary direction said of Inflation continued to improve.
the government says downward trend in The annual inflation, which has abated over the last six months, it will continue after that hit 24-year summit last October. consumer price The CPI fell to 43.68% annually in April approx halving from 85.51% in October.
Erdogan has repeatedly emphasized that interest rates will decrease As long as it is remains in power Inflation is guaranteed.
“Do please follow I in the aftermath of Elections, and you will see that inflation will continue down for along way with Erdogan said in an interview. with CNN International a week ago.
He was asked if that meant there would be no change in policy economist, and he replied, “Yes. Absolutely.”
People’s Alliance, led by Erdogan’s ruling Justice and Development Party, also She kept her grip on Parliament in Parliamentary elections two weeks ago, his chances have increased even more for Re-election.
Critics express their concerns over Possible consequences of the current policy. They highlight risk of Inflationary pressures accelerate economy As temperatures rise upwhich could erode gains made of low interest rates.
they suggest current policy of Low interest rates despite the high prices that drive inflation and triggered destruction in lira against United State dollar.
The currency depreciated by about 44%. against the dollar in 2021 f declined 30% in 2022. Closed at 19.8695 on Thursday This has fallen 6.4% year.
the government Multiple regulations have been introduced tools to be discouraged hard currency holdings.
Erdogan insisted that borrowing costs are high cause High inflation, and the rejection of economic thinking that suggests raising interest rates helps rein in that price He increases.
“I have the thesis that interest rates and inflation are two directly threaded. So the lower the interest rates, the lower the inflation. last week.
In this country, inflation rate Come down for along way with Interest rates until we get to a point where people I will rest… This is not an illusion.”
Kılıçdaroğlu vowed to reverse course current program and return to a more Economic orthodoxy policy with violent rate walking long distances.
in case of Victory for Erdogan, according to Enver Erkan, chief economist at Dinamik Yatırım, the focus will be on Circumstances that can exert pressure on exchange rate international Reserves and possibly inflation force changing in Center bank Policies.
Erkan Tawil asked-term sustainability of Maintain low interest rates to control inflation and exchange rate.
Erdogan has expressed his intention to keep interest rates low and believes that inflation will eventually slow down K resultHe don.
This approach is intended to supporting economic growthmay raise concerns about sustainability of like this policy in the long runBecause it might not be possible To control inflation and exchange rates with Low interest rates alone.
On the other hand, Erkan said that Kilicdaroglu’s approach may tighten economic conditions and lead to containment of inflation. But, at the same time, it may happen also lead to the finite demand and loss of economic momentum in short run.
sustainability of the current policy Path depends on various factors, incl global environment, commodity prices and local economic conditions.
the path Before for Turkish yet vote It will require a delicate balance between addressing inflationary pressures and preserving the economy growth and stability.
The result of The elections and subsequent economic policies will greatly affect the exchange rate, reserves and inflation, Erkan said.
However, careful distribution and evaluation of It is difficult to speculate about these policies in light of the important crossroads in the country.”
“both of them policy options It has its own effects and challenges. “