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Economic

As Turkey’s economy struggles, Erdogan goes it alone

Turkish lira banknotes. AFP

ISTANBUL — A parade of
Central Bank governors have been fired, along with other bank policymakers who counseled fiscal
prudence. Government ministers who once challenged dubious economic strategies are gone, replaced by others who seem to ask few questions and simply say yes.
As President Recep Tayyip Erdogan faces Turkey’s worst economic crisis in almost two decades, he has few independentminded experts at his side — a consequence of his efforts to centralize power, which have sidelined or hollowed out financial institutions to which he once deferred, economists say.
The severity of the crisis came into sharp relief this month when the government announced that the annual inflation rate had reached 36.1 percent, the highest since 2002. That rise was driven by the rapid depreciation of the Turkish lira, which lost more than 40 percent of its value last year, and, more broadly, by Erdogan’s push to cut interest rates based on his unorthodox belief that this would lower consumer prices.
As financial hardship has spread across Turkey, the crisis has prompted fresh scrutiny of the president’s years-long accumulation of authority, from appointing university rectors to naming high court judges. But his
vast powers are little help when it comes to the delicate task of managing Turkey’s economy, which in its current state requires a talent for reassuring global markets and investors — rather than
the political skills and authoritarian inclinations that have long enabled Erdogan to outflank domestic opponents.
The president’s domination of economic policy may become a liability as he approaches elections next year. In a survey by the Turkish polling company Metropoll released in December,about 75 percent of respondents
said their trust in the government’s economic policies had decreased over the past year.
For those who have watchedTurkey’s development over years, including from inside the halls of power, the government’s current approach is a startling contrast with that of Erdogan’s early tenure, when he and members of his party largely deferred to technocrats carrying out reforms aimed at repairing an economy in ruin.
“The institutions are there to tell the truth to politicians,” said Hakan Kara, a former chief economist at Turkey’s Central Bank who left two years ago and now teaches at Ankara’s Bilkent University.
Until recently, he said, there were “healthy checks and balances” that prevented the government from making crucial mistakes.
Now, “that kind of interaction is very weak,” he said. Seasoned economists said they were in the dark about whom the president asks for advice and where the economy is headed.
Three Central Bank governors were fired in a span of two years, along with other bank officials who were said to have opposed Erdogan’s interest-rate cuts. The dismissals were part of a pattern of political pressure on the Central Bank that has intensi fied over the past decade, marked by an increasing number of calls
by Erdogan to cut interest rates, according to Selva Demiralp, a rofessor of economics at Istanbul’s Koc University and a former economist at the U.S. Federal Reserve Board. “We have seen independence eroding,” she said. “And as political pressures go up, inflation deviates from targets.” Turkey also has had four finance and treasury ministers since 2018, including Erdogan’s son-inlaw. The latest, Nureddin Nebati,
appointed in December, is considered a loyalist of the president and has become known for a string of eyebrow-raising statements, including a claim during a TV interview that the U.S. Federal Reserve
is run by five families.
Erdogan has acknowledged the hardships caused by Turkey’s high inflation rate, calling it a “problem,” while asserting that the country is better off than others around the world and insisting that its economic fundamentals are sound. Analysts say the economy has been buffeted by shocks both beyond its control and selfimposed, including the pandemic and a political dispute that led to a trade war with the United States.
“It is clear that there is a bulge in inflation, as in the exchange rate, that does not match the realities of our country and economy,” Erdogan told members of his ruling Justice and Development Party, or AKP, last week. Emergency measures recently taken by the government have helped the lira recover some of its value against the dollar. And state fied over the past decade, marked by an increasing number of calls by Erdogan to cut interest rates, according to Selva Demiralp, a professor of economics at Istanbul’s Koc University and a former economist at the U.S. Federal Reserve Board.
“We have seen independence eroding,” she said. “And as political pressures go up, inflation deviates from targets.”
Turkey also has had four finance and treasury ministers since 2018, including Erdogan’s son-inlaw. The latest, Nureddin Nebati, appointed in December, is considered a loyalist of the president and has become known for a string of eyebrow-raising statements, including a claim during a TV interview that the U.S. Federal Reserve is run by five families.
Erdogan has acknowledged the hardships caused by Turkey’s high inflation rate, calling it a“problem,” while asserting that the country is better off than others around the world and insisting that its economic fundamentals are sound. Analysts say the economy has been buffeted by shocks both beyond its control and selfimposed, including the pandemic and a political dispute that led to a trade war with the United States.
“It is clear that there is a bulge in inflation, as in the exchange rate, that does not match the realities of our country and economy,” Erdogan told members of his ruling Justice and Development Party, or AKP, last week.
Emergency measures recently taken by the government have helped the lira recover some of its value against the dollar. And state

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