In a bold move that could decide the 2023 elections, President Recep Tayyip Erdoğan has adopted a new economic model for Turkey. Predicting that high interest rates would lead to an economic slowdown and high unemployment, he opted for a new approach emphasizing growth, exports and investment. Fully aware of the risks involved, Erdoğan unveiled a number of new policy instruments on December 20 and changed the mindset of the market by controlling the exchange rate.
By creating Turkish lira savings accounts with built-in protections against a weakening national currency, Erdoğan has demonstrated that the pound is not prone to attack. The Turkish people have thus reversed their preference for the greenback. The move not only prevented speculative attacks on the national currency, but also created a framework in which anyone considering speculating against the Turkish Lira should think twice. Erdoğan’s new plan has also re-stabilized the markets to create a window of opportunity. Indeed, a stable exchange rate, somewhere close to the real market value of the lira, would encourage production and exports.
At the same time, to fight the rising cost of living, the government has raised the minimum wage by 50% while finalizing a wage hike for civil servants and retirees. While Turkey takes precautions against excessive pricing and storage, rising inflation remains a global problem.
With his latest gesture, Erdoğan consolidated his image in the eyes of the Turkish people that he alone was capable of solving the economic problems that the coronavirus pandemic has created around the world. Speaking on national television last Friday evening, the Turkish president recalled that he had succeeded in lowering interest rates and curbing inflation as prime minister. Erdoğan argued that “the imperial powers that did not want Turkey to get back on its feet” were responsible for the rise in both numbers after the Gezi Park uprisings in 2013.
Regarding Turkey’s economic model, Erdoğan said: “We ensure the emergence of a stable environment without deviating from the rules of a market economy. We will stimulate production, create jobs and increase exports. We will also provide additional grants and financial assistance. By taking these steps, we make it clear who we are hanging out with. Our goal is to register a current account surplus. We thus aim to improve the well-being of society.
It appears that Erdoğan’s transition to this new business model was informed by preparations for the post-pandemic period. Bearing in mind the global impact of the coronavirus pandemic, which experts say will become increasingly irrelevant by the end of 2022, the Turkish government is keen to seize opportunities and, by extension, facilitate a further leap in economic front. He wants to take advantage of the lingering problems with global supply chains to increase Turkey’s share in world trade and turn the country into a hub of production and investment.
Turkey is home to the 16th largest manufacturing industry in the world, producing $ 125 billion (TL 1.51 trillion) worth of goods annually. It wants to be among the top 10 countries in this area, stimulate exports and create jobs. The authorities predict that Turkey’s annual exports will exceed $ 225 billion in 2021. Hence the government’s plan to maintain robust growth to reduce the current account deficit and eventually create a current account surplus.
This new economic model represents an effort by the ruling Justice and Development Party (AKP), which came to power promising “justice” and “development” in 2002 and has since transformed the country, to promote production, economic development and technological progress. After taking its global position to the next level, Turkey now wants the size of its economy to match its impact.
Meanwhile, Turkey’s opposition leaders, who spoke of an economic collapse, suddenly found themselves without rhetorical ammunition. They did not anticipate Erdoğan’s ability to maneuver and the people’s confidence in his president. Although the opposition continues to criticize the new economic model, Erdoğan, capable of leading the national conversation, intends to consolidate his psychological superiority by taking additional measures.
Ahead of the 2023 elections, Erdoğan will continue to demonstrate leadership in the interrelated areas of foreign policy, national security, domestic policy and the economy. Judging by his fierce criticism of the main opposition mayors, the president will actively choose the main topics of political debate in Turkey. He is likely to take additional steps that will highlight the weaknesses of the opposition – for example, the absence of a presidential candidate, the absence of a clear political program, and populism – in the eyes of the electorate. As such, Erdoğan will maintain its superiority in the management of several key issues on multiple platforms.