2022 Harvest: Turkish Economic Collapse Threatens Erdoğan’s Chair
Turkey is suffering from a worsening economy and rising inflation following President Recep Tayyip Erdogan’s heavy-handed domestic and foreign policy.
Turkish President Recep Tayyip Erdogan has said that it is “clear” that inflation will drop to around 40% in a few months and then to 20% in 2023, just ahead of the next Turkish elections, which reflects strongly on Erdogan’s lies to the Turkish people as they fear losing elections after decades in office.
2022 Harvest of Economic Collapse
Data from the Turkish Statistical Institute showed that the deficit rate in the first ten months of this year increased by 168.3% to $91.05 billion.
Turkey announced via the Turkish Central Bank (CB) last month an unconventional facilitation session that took place despite price hikes and a 9% interest rate cut to 9% from 19% in response to President Recep Tayyip Erdogan’s call for stimulus, a call for elections, but at the same time led to a steep decline in the lira, which has lost more than 28% of its value this year.
Turkey’s economic confidence index suffered a new blow, dropping to 96.9 points in November, compared to 97.1 points in October 2022.
Data from the Turkish Statistical Institute recently announced that the foreign trade deficit increased 421.7% year-on-year to $7.87 billion in October, with imports up 31.4%.
In October, Turkey’s unemployment rate rose to 10.2 percent, a potential challenge to President Recep Tayyip Erdogan’s election hopes for another term next year, even as inflation steeped in and the currency remained largely stable. Economic growth is also expected to remain slumping ahead of presidential and parliamentary elections in May or June, more than 20 years after Erdogan and his party first came to power.
According to many observers, 2022 was the worst year for the Turkish economy. A year ago, Turkey had an inflation rate of 19%.
By April, inflation had risen to the highest level in 20 years at 70%, and inflation had risen to 80%, though some independent economists estimate it to be closer to 150%, owing to higher prices and currency depreciation.
As the global estimate of 150% inflation indicates, Turkey’s poverty index controls 28% of the country’s population, and the despair that unites inflation, unemployment, and poverty is worse than many of the country.
As many economic analysts point out, Turkey’s rate of price appreciation and currency depreciation could lead to hyperinflation and a general collapse of the economy.
Crises that did not come out of nothing
In many of the past few years, Turkey has witnessed a major collapse in the economy, a mounting debt, a collapsing domestic currency against the U.S. dollar, and falling currency reserves.
This has led to exchange-rate shocks, as well as to Turkey’s inability to match up with the water resources needed to contain the economic turmoil that has widened by the day.
In 2018, Turkey faced an exchange-rate crisis due to high debt burdens, financial sanctions, and higher tariffs on steel and aluminum imports from the US, following a dispute over Turkey’s adoption of a Russian missile defense system.
The Turkish economy contracted in 2019, but by early 2020 there was again relative growth.
While the pandemic halted this recovery, by 2021, with the easing of quarantine restrictions and intense government stimulus, the country experienced double-digit growth (11%) for the first time since 2011.
