Turkish President Recep Tayyip Erdoğan’s unorthodox economic policies could be pushing Turkey’s economy towards the edge, Will Conroy wrote in Intellinews.
Erdoğan appeared unmoved on Monday as the lira slid to record lows against the dollar and euro, announcing 135 billion liras ($34 billion) worth of investment incentives to boost economic growth at a ceremony in Ankara.
But analysts say there is growing concern that Erdoğan is going hell-for-leather for short-term growth without adequately considering the consequences for the lira. The president is “simply swiping away” his critics labelling them envious of the country’s economic success, Conroy said.
“The populist president’s latest intractable stance on monetary policy amid an overheating economy heightened concern on the markets that the independence of the Turkish central bank has essentially been lost,” he said.
“How will there be investments if you do not bring down interest rates? We call this an investment-based incentive system,” Erdoğan said in a speech in Ankara. “You have to save the investor from high interest rates so that these investments could be made.”
Erdoğan wastes no opportunity to urge banks to lend more money to the economy to spur growth. William Jackson, senior emerging markets economist at Capital Economics, said that “if past form is anything to go by”, the lira would need to drop by another 5% or so, to about 4.25 to the dollar, in the next week or two to prompt a significant monetary policy response from the central bank, Conroy reported. But there are those who wonder if even then it would dare act in the face of ‘Erdoganomics’, he said.