Turkey is witnessing a collapsing economy as the country’s currency Lira’s value has plunged as much as 45 per cent this year. The reason is largely considered to be the economic policies of President Recep Tayyip Erdogan. This has also led to crushing support to Erdogan, even in his hometown on coast of Black Sea. Residents are now questioning their favorite leader’s leadership style as they struggle under mounting prices of food, gasoline and medicines. The key vote base for Erdogan have been poor and middle class people for the last two decades that he has been in power – but now they are not happy with what is transcribing. Big problem is looming for Mr. Erdogan, the opinion polls show.
Erdogan has been an authoritative leader and his increasing dominance in power with agenda of sticking to his line of plan have stirred up the economy of Turkey. Erdogan has long argued that high interest rates lead to inflation – a concept that is contrary to what economists say, that increasing rates of interest will actually bring down the prices. As a result, Central Bank of Turkey had to slash down borrowing costs by 4 percentage points, despite inflation rising to around 20 per cent. The unconventional monetary policy by Erdogan government has spooked the international investors – result is they are abandoning Turkey’s assets. Citizens of Turkey are scrambling to protect themselves from soaring inflation – they are converting their money to foreign currencies and gold. “People bring their savings and always want to buy dollars. When will it end, where will this go? They’re panicking,” said Hulya Orak, a currency exchange office worker. “People are constantly in panic mode and are using money that’s under their mattresses.” This has further weakened Turkish Lira in comparison to Dollar and Euro.
The reduced value of Lira has further driven prices astronomically. As a result prices of import, fuels and even everyday goods are skyrocketing. Cheap goods like bread are a luxurious commodity now. Long lines outside kiosks that sell bread one Lira cheaper than bakeries tells the tale. “We are cutting down on everything,” Sinasi Yukselen said as he waited in line. “I used to buy 10 loaves, now I buy five. We’ve given up trying to buy meat.”
What can further entail? A brain drain in most probability, fears Selva Demiralp, economics professor at Istanbul’s Koc University. “When your salary gap between what you can earn in Turkey versus what you can earn abroad widens so much, it’s just going to be very difficult for us to keep those highly educated white-collar people at home,” she said. “And that’s a major threat for the future of the country.”
Erdogan has been firing top officials who disagreed with him on key issues including cutting of interest rates, raising questions on his policies and leadership.
Monday was one of the last straws in sack when Lira dropped to a record low in an investor sell off, triggered by statements from Turkey’s finance minister that Central Bank could further cut the interest rates. The situation was worsening and Central Bank had to eventually intervene – foreign currency was sold off for fourth time in recent weeks.
The gravity of situation isn’t lost on Erdogan as he addressed the country in a televised session on Wednesday. “We know where we are going, I ask our people to be patient.”