Roundup: Turks pin hope on new government to reverse economic woes-Xinhua

Roundup: Turks pin hope on new government to reverse economic woes

Source: Xinhua

Editor: huaxia

2023-05-31 23:07:00

by Burak Akinci

ANKARA, May 31 (Xinhua) -- After President Recep Tayyip Erdogan won a hard-fought election on Sunday to serve for another five years, Turkish people are turning all eyes on the new government to reverse the devaluation of currency and the consequential high inflation.

At a victory speech on early Monday, Erdogan said he would remain committed to his low-interest rate policy while noting that inflation, which climbed to nearly 44 percent, has been the country's most urgent problem.

Erdogan said "a strong economic management on the concept of trust and stability" would be launched, signaling a possible change in monetary policies.

Private broadcaster NTV reported that Erdogan met in the capital Ankara on Monday with former economy chief Mehmet Simsek, without revealing details about the meeting.

Simsek is viewed as almost certain to be included in Erdogan's new cabinet for overseeing the ailing economy, a move aiming to restore credibility among investors.

The Turkish lira has tested fresh all-time lows against the U.S. dollar after the presidential election, which slipped to a record low of 20.70 on Wednesday. During these two years, the lira lost over 70 percent of its value against the greenback.

High inflation and depreciation of the lira, which led to the weakening of citizens' purchasing power and the surge in the cost of living, are at the heart of the country's economic woes for the past few years.

To prevent price rises and promote economic growth and job creation, the government devised an unconventional strategy in 2021 based on lower borrowing rates aiming to curb increasing inflation.

Financial analysts warn that regarding individuals not trusted by citizens, companies, and markets may be appointed as Türkiye's new monetary policy maker, there's potential turbulence in the balance of payments within the coming months that might lead to harder controls on capital.

"Erdogan has expressed his intention to maintain low-interest rate and believes inflation will eventually slow down as a result," Enver Erkan, chief economist at Istanbul's Dinamik Investment Securities, told Xinhua in an interview.

"This approach may raise concerns about the sustainability of such a policy in the long run, as it may not be possible to control inflation and exchange rates with low-interest rate alone," the economist noted.

According to the Turkish Statistical Institute, Türkiye's trade deficit widened to 8.7 billion dollars in April, a 42.1% increase from a year earlier.

The country is also trying to emerge from the huge financial impact of devastating earthquakes that jolted the country's southern provinces in February.

Reconstruction efforts are underway as Erdogan promised to rebuild thousands of houses within a year, but vast sums are needed to fund the project which could cost roughly 100 billion dollars.

Baki Demirel, an economist and scholar at Türkiye's Yalova University, said Türkiye should engage in a policy that allows a fairer distribution of wealth in the society, rather than focusing on increasing exports and tourism revenues in foreign currency.

Demirel suggested Türkiye should also increase its industrial and manufacturing output to alleviate Türkiye's economic woes.