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May 23, 2023
Economists are discussing the Turkish economy because of the significant election impact. In several surveys, many have started selling their Turkey Lira. This is a way to deal with economic turmoil without being negatively affected.
Investors have been amazed by how the Turkish economy has been doing recently. But overall, the country's economy will remain in a gambling zone. Moreover, Erdogan's influence has remained.
"President Erdogan's unexpectedly strong showing in the Turkish presidential election shows that orthodox economic policy-making is not going as far as before. And the Lira will remain under serious pressure this year," said James Reilly.
"Türkiye needs to curb inflation and maintain financial stability. This is by putting the economy on a sustainable growth path, regardless of the election outcome. If policies are shifted to greater orthodoxy, the disinflation process will be faster," stated JP Morgan.
Many have questioned the Turkish Central Bank's decision to withdraw from its initial policies. Previously, the Central Bank of Turkey imposed restrictions on Monday to cope with the decline.
Turkey's economy is targeted to decline by at most 1% this week after the presidential election. The restrictions imposed by the Central Bank have prompted Turkish banks to cut lending to individuals delaying the decision to extend business loans.
Several banks have also raised monthly interest rates above 3%, while some have borrowed interest of 4%. Bankers point out that lending at current interest rates is very limited, encouraging banks to lend when needed.
This means lenders are no longer required to own low-yielding government bonds. This is a step that Turkey could not help but take amidst the worst cost of living crisis the country has experienced in 2 decades.
Cash withdrawals and credit cards are the methods most Turkish people use to manage their living expenses and protect against inflation. Several Turkish banks have restricted access to individual loans as well.
The rise in monthly interest rates above 3 percent and bankers emphasizing limited economic policies are a response to Erdogan's vigilance of victory and his orthodox economic policies.
Banking sources also said that the latest regulations aimed at slowing the growth of individual loans would skyrocket before another election. To speed up economic restoration, the Central Bank confidently said it would take steps that could encourage currency conversion.
"Financial institutions unsure about economic policies and costs after the elections are advised to avoid lending. Because from this selection, it can cause difficulties to get loans increasing daily, hour by hour," said one Turkish economist.
Investors are also increasingly nervous about calculating the economic fate of Türkiye and the Lira. The prospects that can be seen for now are worrying, so the Lira's financial market, which is sinking to a new record low, could worsen.
Soaring inflation and a plummeting Lira are significant problems in the Turkish economy. Much express disappointment with Erdogan, who is considered the leading cause of high inflation because of lowering interest rates.
But the global labor market should also be in the spotlight. Especially after Erdogan, who still has the possibility of winning this election, the Turkish people and economic actors must be serious about encouraging economic growth.
Amidst the current conditions, the influence of the election on the economy will again be determined by the election's winner. Now, Lira's fate will also be determined after the election.
Türkiye is being hit by a crisis that may last for a long time. Erdoğan's 20-year policy of maintaining an orthodox economy is the main reason. For now, the focus is on reversing worsening inflation and pushing up the price of the Lira.
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