ENAG Founder: After the election, exchange rates and prices will rise, wages will erode

As Turkey heads into the March 31 local elections, the fluctuations in the economy have intensified even more. While the Turkish Lira depreciates every passing day, foreign currency is hitting new records. There’s no source for retirees. Inflation has increased by over 11% in just 2 months, eroding the recent raises, and what happens after the elections is a complete mystery… I talked to ENAG Founder Prof. Dr. Veysel Ulusoy about the economy, inflation, economic fluctuations, and the scenarios that will unfold after the local elections.

-According to TÜİK, we lost 11% of our wages to inflation in the first 2 months of 2024. I guess combating inflation won’t be as easy as the government hoped.

Managing and directing economic policies in countries where inflation exceeds a certain threshold level is difficult. With inflation rates hitting three digits for the past few years, wages are rapidly eroding in real terms, which also rapidly erodes national income. With the fact that about 60-70% of the national income measured by the expenditure method comes from consumption expenditures, the decrease in real wages also weakens our nation’s wealth accumulation. With reserves rapidly depleting, the inability of the Central Bank to manage the exchange rate, and constantly rising prices in the domestic market, wages will erode even further in real terms. It must be said that it will be difficult to correct this in the near future and beyond.

-In the February inflation data, TÜİK for the first time announced higher data than ENAG. Is there a change in TÜİK, or is there some preparation?

Now, instead of occasionally announcing inflation correctly, TÜİK should make this a continuous practice, and it should also ensure that the sweat taken from the people’s pockets through data is compensated. I’m afraid in the coming period, both officials and political authorities will face lawsuits that will be quite a headache. We experienced the latest example of this in Argentina and Greece.

-This process seems to affect retirees the most. I think the President has given the clearest signal on this.

Because there’s no money, there’s no source left. National income has been completely transferred to a few families… and it’s still being done.

-Should a new salary increase be made in the middle of the year?

It’s mandatory to do it several times. After all, the people have a resilience. If the cost of living increases and wages can’t keep up, we’ll become an even more restless society.

-The question everyone is wondering about: What will happen in the economy after the elections? What are your expectations?

Elections cover periods where prices and other negatives are suppressed. This time there’s no different development. In addition to the effort to stabilize reserves supported by swaps, pressure on exchange rates, and efforts to stabilize prices through telephone traffic, erosion in the level of democracy will increase not before, but after the elections, which will increase the exchange rate, increase prices even more, and erode real wages. This lack of a program and political management style will leave the country in trouble for a much longer period.

-It seems like the public has started preparations for post-election as well. Can we interpret the movement in foreign exchange this way?

Economic growth rates are calculated wrongly in an environment where inflation data is suppressed. In other words, it comes out too high when it happens. Economists who know the mathematics and methodology of economic growth in recent times have often emphasized this. If inflation and national income data are incorrect, it wouldn’t be wrong to say that the volatility of other data will increase. One of these is the exchange rate.

It would be unreasonable for the exchange rate, which depends on variables such as the difference between the country’s inflation rate and other countries’ inflation rates, the level of national income, and the inflation rate, to remain at today’s value. Those who understand this are already flocking to currency exchange offices and jewelers.

SOURCE: BIRGUN.NET – Interview withe Veysel ULUSOY
Translated into English by BTT