Turkey‘s government is insisting on achieving marginal growth in the economy this year at extraordinary cost to the country, columnist Erdal Sağlam said in Cumhuriyet newspaper on Thursday.
Turkish Treasury and Finance Minister Berat Albayrak told parliamentarians of his governing Justice and Development Party (AKP) this week that the economy would grow this year, even if the expansion amounted to just 0.1 percent. Albayrak is clearly aiming to prove the party’s economic success by attempting to deliver on that goal, Sağlam said.
But the cost of this policy far outweighs the benefit to the country, according to Sağlam. He pointed to Turkey’s widening current account deficit, exhausted foreign currency reserves and the difficulties companies are experiencing in rolling over their foreign debt.
Despite a recent slump in the value of the lira, Albayrak is saying that the Turkish authorities will not intervene in the currency markets unless there is an emergency, he said. Under government orders to keep interest rates low, the central bank has spent about $100 billion of its foreign currency reserves this year in the lira’s defence, but it has been unable to arrest its declines against the dollar, which have grown to almost 30 percent.
Albayrak is now saying Turkey wants a “competitive lira”, knowing that the government’s options to defend the currency have run out, according to Sağlam.
The situation could get worse, he wrote, saying international ratings agencies were expected to continue downgrading the country’s sovereign debt further into junk territory. Meanwhile, there is now talk of financial troubles in the banking system as bad loans continue to grow and companies become insolvent, he said.
The government has also ruined a hard-earned reputation for financial discipline among investors in the chase for economic growth, so much so that it has exhausted cash accumulated in a vast unemployment fund and is now transferring share dividends in a leading Turkish bank belonging to autonomous state institutions to the Treasury, Sağlam said.
The problem for the government is that, despite its insistence on securing economic growth to prove its success, Turkish citizens are now experiencing the negative repercussions of its misguided policies in their everyday lives, he said.