Introduction:
Turkey's Justice and Development Party (AKP) government, which has been in power since 2002, is facing a severe economic crisis for the first time. This economic crisis is actually caused by President Tayyip Erdoğan's change in the country's fiscal policy and especially the reduction of interest rates.
President Tayyip Erdoğan has been in favor of keeping interest rates low in the country from the very beginning but interest rates have always been high in the country. Unable to, It is also a fact that the Republic of Turkey has been suffering from economic crisis every twenty years since its inception and is now moving towards economic crisis once again.
1- Turkey is one of the fastest growing economies in the world:
Although the world views it as an economic crisis, when you look at the facts, it is clear that Turkey is currently one of the fastest growing economies in the world. According to IMF, Standard & Poor's, Moody's, IMF and UN, Turkey is the fastest growing country in the world in 2022-2021.
Turkey's current trade volume is about 400 billion Dollar, an increase of 27.47 percent over the previous year, and it has set a new record in exports, earning about 250 250 billion, while in the defense industry, Turkey has doubled in the first eleven months. Corona earned 20 billion and 20 billion from the tourism sector, despite various restrictions, and is expected to receive 40 to 40 billion from 50 million tourists next year. Is this an economic crisis?
2- Why did the Turkish Lira lose more than 50% of its value?
So how did the Turkish lira lose more than 50% of its value in one year? Despite Turkey's currency floating system, attempts have been made to artificially stabilize the value of the Turkish lira (as was done in Pakistan by Finance Minister Ishaq Dar under Nawaz Sharif). The actual value of the Turkish lira is about 14 lira.
But it was forcibly kept artificially up to eight lira. However, as the Turkish lira came under more pressure, it could not bear the load and returned to its original value. (According to economists, this is likely to decrease further in six months)
3- Turkish people's confidence in foreign currency:
Another reason is that Turks rely on foreign currency instead of their own currency in their daily lives and are withdrawing their money from banks and converting it into dollars or euros. The main reason for the devaluation of the Turkish lira is the insistence of foreign investors on keeping interest rates high in Turkey and threatening to take back their currency if they do not.
Tayyip Erdoğan has made it clear that he will not raise interest rates under pressure from foreign investors but will continue to reduce them. Interest rates are expected to fall further on December 16.
4- President Tayyip Erdoğan risked his political life by lowering interest rates:
President Tayyip Erdoğan has played the biggest gamble of his political life by lowering interest rates. President Tayyip Erdoğan and his government are well aware (albeit of late) that foreign investors continue to return to Turkey with both hands. Foreign investors would convert their foreign currency into Turkish lira and deposit large sums of money at special interest rates over a period of time, earning a profit of twenty to thirty percent a year. The proverb of Urdu language is "Bani ya falls just by seeing something".
Similarly, foreign investors have been accumulating their money not in love with Turkey but in the cycle of doubling their money without any risk in a few years. After doubling their remittances, these foreign investors would withdraw their money from Turkish banks, convert it back into dollars, and remit the double money to their home countries, creating a shortage of artificial foreign currency in Turkey, leading to a surge in foreign exchange in Turkey.
Demand for the currency would have risen sharply, leading to a steady decline in the value of the Turkish lira. After realizing this game of foreign investors, President Tayyip Erdoğan had no choice but to change his monetary policy. There are more opportunities for real investment, production, more jobs, more exports. President Tayyip Erdoğan needs at least six to eight months to achieve the results of this economic model.
Summary/Conclusion:
This is the first time in 20 years that the opposition has had the opportunity to use the people against President Tayyip Erdoğan, but it has not been able to bring the Turks to the streets and demand early elections.
As mentioned above, President Tayyip Erdoğan's popularity has certainly declined, but he is well aware of the art of increasing his popularity, and if he gets a chance to complete his new economic model, he will run for the presidency in June 2023. Winning the parliamentary elections once again, he will be elected president for the next term and the world will follow his economic model.
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