Coalitions have weighed down Turkish economy, analysts say

Published 03.06.2015 22:03
Updated 03.06.2015 22:04

With only days to go until the June 7 parliamentary elections, top economic experts focused on Turkey have said that past coalition governments have hampered the country's economic development, have been the main cause of instability, and that markets would not view any source of uncertainty favorably. Consulting group IHS Global Insight's Turkey specialist Andy Birch said they did not foresee a coalition government after the elections, adding that the markets would view such a low-possibility scenario very negatively.

If the ruling Justice and Development Party (AK Party) do not form a single-party government after the elections, there is a serious possibility of the Turkish lira falling off the roof and capital inflows ceasing.

He also referred to the coalition governments of the 1970s and 1990s as the main causes of instability and economic crises in the past, adding that any uncertainty concerning the composition of the government would adversely affect economic figures.

Assistant Professor Hatice Karahan of Istanbul Medipol Üniversitesi said International Monetary Fund (IMF) studies have shown that the lack of political stability had put a damper on per capita income growth, capital inflows and economic activity. She also highlighted the tendency of politicians to pursue populist policies in coalition governments, which was directly reflected in the national debt. She also stressed the lack of long-term monetary policies that aimed at stability in favor of inflation augmenting short-term projects. She cited the 1990s, which some experts view as "the lost decade," as the obvious evidence of what had happened in Turkey during the rule of coalition governments. The same phenomenon happened in the 1970s, she added. Karahan said single-party governments had an obvious advantage over coalition governments in terms of economic performance, as could be seen from the era that began with the Democrat Party (DP) in the 1950s and the Motherland Party (ANAVATAN) in the 1980s. "Political stability produced by single-party governments eases the implementation of strong economic policies. The most successful and long-lasting in terms of stability has been the AK Party era. In this respect, the AK Party era is not only unique in terms of political stability but also economic stability," she said.

Economist Wolf-Fabian Hungerland from the consulting firm Berenberg also shared the opinions of other economists with respect to economic growth, adding that they expected a single-party AK Party government after June 7. However, if a coalition was formed, the markets would watch all developments very closely.

Hungerland said the long-term priority of the government had to be the inclusion of more women in the workforce, in addition to the more efficient exploitation of hydroelectric and renewable energy resources. He also highlighted the importance of encouraging people to save more to replace foreign capital needed for investments with domestic capital.

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