Turkey Pulse

Turkish economy faces grim outlook for 2019

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Article Summary
THE OECD forecasts that the Turkish economy, after contracting this year, should grow again next year; Erdogan goes after former presidential candidate Meral Aksener.

ANKARA, Turkey — The Turkish economy will contract by as much as 1.8% this year, the Organization for Economic Cooperation and Development has forecast.

The prediction came in a week that saw opposition newspapers deploring the soaring cost of vegetables, President Recep Tayyip Erdogan’s blaming the price rises on speculators whom he likened to “terrorists” and opposition leader Kemal Kilicdaroglu’s scoffing at Turkey’s having to import onions from Egypt.

“Growth prospects remain weak in Turkey,” the OECD said in its Interim Economic Outlook. “Financial markets have stabilised and external competitiveness has improved, but weak confidence, high corporate-debt service burdens, tight monetary policy and soft demand in euro-area markets still weigh on domestic and external demand.”

The silver lining of the March 6 report is that the OECD predicts the contraction will be short. It expects Turkey’s economy to grow by as much as 3.2% in 2020.

The Birgun newspaper published the report under the headline “Economy to contract beyond our expectations.” It was referring to the fact that in November the OECD had forecast the economy would contract by a modest 0.4%, but on Wednesday it said the contraction would be as severe as 1.8%.

The OECD says the priority for economies such as those of Turkey and Argentina is “to undertake reforms that enhance the prospects for fiscal and financial sustainability in the medium term.”

This means Turkey should implement austerity measures, the economist Cem Oyvat told Al-Monitor. But this is not what the government is doing.

Oyvat said government policies are expansionary. He pointed to its cutting the taxes on the sale of major appliances and cars, ordering the state housing agency to build 50,000 apartments, and offering incentives for employers to hire staff. Figures show that government expenditure increased by 62% in January.

Interestingly, Oyvat said he believes the government is right to defy the OECD.

“Austerity would be suicidal for the economy. There are so many bankruptcies and defaults on payment. The expansion from the private sector is very limited. Therefore if you implement austerity, you’d come out with even further contraction,” said Oyvat, who teaches economics at the University of Greenwich in London.

However, Oyvat said that the repeated fiscal deficits run up by the government are not sustainable.

Simultaneously, the autoworkers’ union, Birlesik Metal Is Sendikasi, published a report saying that while the minimum wage has increased by 413 Turkish liras ($76) from January 2018 to January 2019, the poverty line has increased by 1,060 liras ($196). The union’s economic research center defines the poverty line as the minimum level of monthly income to keep a family of four out of poverty.

Inflation is about 20%. The union said its researchers found that with the latest price increases, the poverty line in February was 6,798 Turkish liras ($1,257), and that the daily amount that a family of four spends on fruit and vegetables has risen to 13.98 Turkish liras ($2.59).

President Recep Tayyip Erdogan is acutely aware of how much the rising cost of food is likely to affect voters when they go to the polls March 31 in municipal elections. He has ordered town councils to open food stalls where consumers can buy fruit and vegetables at supposedly rock-bottom prices. Erdogan has told voters the government is subsidizing the price “for the benefit of our people.”

But Ibrahim Uslu of the ANAR polling company told the press that the municipal food stalls were not having a big impact on voters.

“People are consuming many more kinds of food than the ones sold in municipal stalls. At the beginning of 2018, one out of two people were talking about their economic hardships, but it is three out of four people now,” Uslu said.

Uslu did not give the figures that ANAR is gathering from its surveys of people’s voting intentions on March 31. However, he told Birgun that in cities such as Istanbul, Ankara and Izmir “it is a close race, but the opposition has a slight advantage.”

Uslu said he thought Erdogan was making a mistake by focusing his campaign on appeals to political identity, and thereby allowing the opposition to capitalize on the economic crisis. The Cumhur Alliance of Erdogan’s Justice and Development Party and the hard-right National Movement Party (MHP) is telling people to vote for “beka,” a word that means something between survival and permanence.

Asked if “beka” was managing to win opposition voters to the Cumhur camp, Uslu replied: “It is not for opposition voters. It is an attempt to consolidate their own [Cumhur] vote. But we cannot say that they are succeeding. The Cumhur Alliance is losing voters.”

In a separate development, Erdogan broke new ground today by making a personal attack on Meral Aksener, the leader of the right-wing Good Party.

Pundits have long observed that while Erdogan often denigrates the leaders of other opposition parties, he has eschewed attacks on Aksener. The reason seemed to be that Aksener hails from the MHP, which is allied with Erdogan, meaning her supporters belong to the same constituency that the president cultivates. Aksener herself has told reporters that Erdogan does not like to compete against a woman.

What triggered the change was a speech Aksener made in the western town of Denizli on Wednesday. Addressing an enormous crowd, she began by making fun of the fact that Erdogan repeatedly calls his opponents “terrorists” and says they are in league with the Kurdistan Workers Party, the Kurdish militant group.

“You citizens of Denizli whom the president calls terrorists, how are you?” Aksener said, provoking cheers and guffaws of laughter.

“A president who calls 18 million of his citizens terrorists!” she said, referring to a rough total of votes that the alliance of opposition parties polled in the general elections last June. “Even as a joke, how awful it is [to use the word terrorist].”

She accused Erdogan of polarizing the country and “making us enemies of each other.”

Today Erdogan replied while campaigning in the southeastern city of Mardin.

“Meral Hanim is saying that I called my brothers in Denizli terrorists,” he said. “Shame on you. Shame on you. You are deprived of shame. I have just now engaged my lawyers for this business.”

Erdogan filed 6,000 lawsuits against his political opponents last year, the exiled journalist Can Dundar wrote in Die Zeit newspaper in December.

Jasper Mortimer is a South African-trained journalist who works for France24 TV and GRN. While traveling the world, he was waylaid in the Middle East, married a Turkish woman and settled in Ankara in 2007. He covers the Kurdish issue, the Syrian war and Cyprus.

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