For a while, I have been amazed by how the "asymmetric order" has cornered countries in Latin America, in Turkey's region and in the Asia-Pacific region since the 1970s. These regions have since started processes to strengthen their national sovereignty with economic moves and "'global interest claw" operations. While this "order" worked to rumple the production and investment pace of countries through exchange-rate operations, it also promoted addictions to its own system by creating dependence on the programs of the International Monetary Fund (IMF).
Indeed, the "dealers" were the third group to make an appearance following the exchange rate-interest rate operations plotted against leading developing countries such as Turkey, Brazil, Indonesia, Russia, Argentina, South Africa and India for the last 30 years.
The "dealers" are the last stage; the last team of the operation that buys the private-sector companies of countries whose financial structure was weakened with "high exchange rate and high interest rate operations." They buy up the factories and investments at one-tenth, sometimes one-twentieth, of their actual value. The "coyotes," "hyenas" and "dealers" are vying for the result they want from the June 24 elections. They will continue to come up with new strategies and tactics for their "perception management operation" to discourage the Turkish private sector and cast doubt on the exchange rates and interest rates. Although the Central Bank of the Republic of Turkey (CBRT) has taken steps to tighten its monetary policy, the naysayers will try to imply that "it will not save the situation," "the global risks are rising" and will continue to feed the perception of "instability" about the exchange rates.
And this triad gang will keep all their means and figures rolling to maintain the mirage of "political instability" for June 24 to try to block the Turkish economy - whose goal is to attain a national income of $1.7 trillion to $2 trillion within the next decade.
June 24 is a critical historic threshold to add value to Turkey's public- and private-sector companies, investments and factories. It will help propel Turkey to the top 14 economies; then to the top 12 by between 2030-2050; and among the top 10 between 2050-2100 with hi-tech-oriented projects in information technology, energy, transportation, defense and aerospace. We will overcome this threshold either with the strong leadership of President Recep Tayyip Erdoğan or leave Turkey at the mercy of the "dealers." Let's focus on the team that will draft the "national security economy document" for the next 25 years.
Prioritize the fight
against cost inflation
The May inflation figures released Monday showed that - in terms of the pass-through effect of devaluation on inflation - nearly half of the 4.5 point inflationary effect of the exchange rate from March to May was reflected on the producer price index (PPI). While the domestic PPI, which measures cost inflation, jumped from 16.4 percent to 20.2 percent, the consumer price index (CPI) increased from 10.9 percent to 12.2 percent. The fact that cost inflation increased by 8 points on an annual basis requires an important cost inflation study toward the next 1.5 years.
A comprehensive economic program needs to be drafted on the issues that increase the production and import costs of the real sector. The effect of foreign exchange rates on costs should be managed with CBRT's efforts toward financial stability.
The reduction of the impact of taxable and tax-exempt ordinary income on the costs of the real sector requires the Finance Ministry to conduct a considerable contraction in public expenditure as well as to alleviate the public burden on the real sector with the funds obtained, without impairing the budget balance. The third issue is managing export costs. Additional customs tax charges for imported raw materials and intermediate goods imposed by the Economy Ministry must be analyzed and some remedial measures must be taken. The fight against cost inflation can only be carried out with these three pledges. If we ignore these fundamental points and continue to cope with cost inflation with radical interest rate hikes, with the financing costs of real sector increasing dramatically, we could find ourselves in an unpleasant conjuncture in where cost inflation continues to rise, the economy is dragged into a recession and unemployment increases.
You can also see the steps I mentioned above reflected in the lines of statements made by the economic administration over the last 10 days. At this point, the speculations or comments saying the Turkish economy is "overheating" are completely wrong.
Overheating in the economy means that the economy is over-demanding, over-consuming, and therefore the demand inflation is very high. However, the Turkish economy has not been in the grip of cost demand, but of cost inflation for the last 18 months. Therefore, instead of listening to arguments that the market is overheating and that the wrong precautionary measures are being taken, it would be more sensible to support prioritizing the fight against cost inflation.
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