What did the Government say about the economy and what happened?

Turkey without any doubt has been going through a difficult period in terms of economy. President and AK Party Chairman Tayyip Erdogan has said in statements since the beginning of the year that inflation, interest rates, the current account deficit and the dollar exchange rate would go down, but the picture that has emerged has been the opposite.

Here are the statements made by Erdogan and the resulting picture:

EXCHANGE RATE

WHAT DID HE SAY? “Inflation has entered a decline, it will enter a decline. That’s for sure. Gradually, without haste, the exchange rate will also fall, interest rates will fall in the same way, and I hope that 2022 will be our brightest year.” (January 18, 2022)

WHAT HAPPENED? Inflation went up, not down. The official inflation announced by TURKSTAT reached 80 percent. The dollar exchange rate, which started the year at the level of 13 lira, exceeded 18 lira. The first 8 months of 2022 were not bright for the citizen, but dark. The cost of living captured the entire society (except for a very small minority, surely).

INFLATION

WHAT DID HE SAY? “At a time when developed countries are tottering with inflation that has increased to 6 – 7 times and money expansions out of control, Turkey is confidently continuing its way on its own track. Look at America, inflation is catastrophic. Come to Europe the same” (January 15, 2022)

WHAT HAPPENED: Turkey became the country with the highest inflation among the G20 countries and European countries. With an inflation rate of 79.60 percent, Turkey has the highest inflation rate in the world, as the 6. the country on the list. The countries with higher inflation than Turkey are Syria, Sudan, Venezuela, Lebanon, Zimbabwe.

INTEREST RATES

WHAT DID HE SAY? You know my fight against interest, we are going to cut interest and we are lowering it. Know that inflation will also go down, it will fall even more. The exchange rate stabilizes, inflation decreases, expensiveness disappears. And all of these are temporary. (January 29, 2022)

WHAT HAPPENED? While the Central Bank decreased its “policy interest rate” to 13 percent this month, the business world is in riots over “actual” loan interest rates of up to 50 percent in banks. As citizens try to sustain their lives with debt in difficult economic conditions, on the other hand, consumer loan interest rates have exceeded 35 percent and reached the peak of the last 4 years. While the demand of the citizen is decreasing, Erdogan’s struggle with interest has not benefited anyone.

CURRENT ACCOUNT DEFICIT

WHAT DID HE SAY? “We have started to implement our own Turkish Economic Program based on growth through investment, employment, production, exports and current account surplus. Among other measures we have taken, we plan to ensure price stability by increasing the current account surplus with an exchange rate at the level that suits our business.” (June 6, 2022)

WHAT HAPPENED? The biggest claim of the government in the new economic model was to give a current account surplus with the ‘competitive exchange rate’ advantage that keeping the value of the TL low would bring. However, the picture was the opposite due to the effect of high commodity prices. According to the latest updated balance of payments data announced by the Central Bank, the current account deficit increased by $ 2 billion 269 million in June compared to the same month of the previous year to $ 3 billion 458 million. the 12-month current account deficit reached 32 billion 667 million dollars.

CREDIT RATING

WHAT DID HE SAY? “We continue to pay symbolic prices for inflation in the recent period. We will continue knowing that there are more opportunities than the prices we pay. We will not compromise on the economic model. Although some want to overshadow the success of our economic policy, international assessments say the opposite.” (August 1, 2022)

WHAT HAPPENED? 15 days before Erdogan made these words, Turkey’s premiums on the five-year credit insolvency risk (CDS), which measures the risk of insolvency, exceeded 900, reaching the highest level since 2003. 11 days after Erdogan’s statements, the international credit rating agency Moody’s announced that it had downgraded Turkey’s credit rating from B2 to B3 and changed the rating outlook from negative to stable. Moody’s cited increasing pressures on Turkey’s balance of payments and the risk of a further decline in foreign exchange reserves as the reason for the downgrade of its credit rating. The organization noted that they expectED the current account deficit to exceed expectations by a large margin. Fitch downgraded Turkey’s rating from B+ to B on July 8. The outlook is negative. S&P, on the other hand, made the last update on December 10, 2021. The outlook turned from stable to negative, while the credit rating remained at B+.

SOURCE: sozcu.com.tr/2022/ekonomi/erdogan-ekonomide-ne-dedi-ne-oldu-7332054/