09 September 2019 10:04

Towards the nadir in Turkey’s economy

With 2.8 percent contraction in the last quarter 2018 and 2.4 percent in the first quarter of 2019, the stagger towards the nadir in Turkish economy is expected to continue.

Photograph: Pixabay

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Erkan AYDOĞANOĞLU

For the broad sections of people, especially the waged labourers, a de facto period of ‘austerity’ has been underway for a while now in Turkey, which is facing the harshest economic crisis of its history. Everything about the daily life of the public and almost all economic indicators of the crisis process, which made its effects felt from the latter half of 2018 and which progressed by deepening further from the start of 2019, seems to raise the alarm.

The Turkish Statistics Institute (Türkiye İstatistik Enstitüsü - TÜİK) announced the growth rates for the second quarter of 2019. The Turkish economy which has been shrinking since the last quarter of 2018, has recorded a further negative growth of 1.5 percent in the second quarter of 2019. With 2.8 percent contraction in the last quarter 2018 and 2.4 percent in the first quarter of 2019, the stagger towards the nadir in Turkish economy is expected to continue.

It can be observed that investments in Turkey are undergoing their biggest decline since the first quarter of 2009. In contrast to the same quarter of last year, investments in the first quarter of 2019 has decreased by 12.4 percent and by 22.8 percent in the second. The decrease in investments were over the annual growth rate with as high a figure as 7.3 percent. The most concrete consequence of this will be observed in the rates of unemployment.

Berat Albayrak, the Treasury and Finance Minister, had forecasted a growth rate of 2.3 for 2019 in the New Economy Program (Yeni Ekonomi Program -YEP) he announced at the end of 2018. Despite the converse shown by all the indicators, bewilderingly, he claims that his end of year target will be met. If Turkey’s growth performance in 2019 continues as it had, in parallel with IMF, World Bank and OECD forecasts, it is expected that the Turkish economy will shrink by almost 2 percent in 2019.

The inflation rates announced by TÜİK at the beginning of the week also caused controversy. Despite price increases in many items ranging from tea to tobacco, from electricity to gas in August, no one in their right mind is convinced that monthly inflation has increased by 0.86 percent and that annual inflation rate is 15 percent. Despite the announcement by Istanbul Chamber of Commerce that the inflation in food prices is 22.55 and that it is 22.19 by Türk-İş [a major trade union confederation], TÜİK’s announcement has been 17.22 for the same, where it is not possible to account how this figure has been reached through even ‘the statistical method’ they espouse.

While the ratio of the household debt to income was 4 percent in 2002, the same figure for the present is still higher than 50 percent. The public’s increasingly surfacing issue of impoverishment is due to deepen even further with increases made in basic consumption products and which are expected to continue as well as with possible new increases in indirect taxation such as VAT.

While various easements for credit and debt is introduced to protect those who has been causing the downturns experienced and yet to be experienced in economy, the workers and labourers, who has no hand in the crisis, have began to foot the bill for the crisis heavily with the price increases arriving one after another and with low rate increases in wages and salaries.

In the present situation when the crisis has begun to exert its effect more noticeably, there is no need to say who is responsible for the economic adversities reaching this point. It is important for the sections who have trustingly supported this government to start seeing and questioning this state of affairs.

If the price increases introduced in the last few months in Turkey were to be made elsewhere in the world, it would have caused a turmoil. Yet we are unable to state that a powerful, active and widespread reaction has been shown until now against either the consequences of the economic crisis in general or the price increases which has deeply affected the public.

Analysis about the course of the crisis and exposition of those responsible for the crisis, to be sure, does not amount to much in itself. So long as organised and powerful struggles are not waged against the concrete results of the economic crisis, it seems inevitable for the entirety of the increasing expense of the crisis to be condemned to the shoulders of the public.