Republican People’s Party (CHP) Vice Chair Aykut Erdoğdu warns the economic crisis will continue to deepen accompanied by the growth rate of 2.6% and the shrinkage in production. Asserting that the conflict in the foreign policy contributes to the impoverishment of Turkey, Erdoğdu says “They will once again pour money in order to secure a success in the elections.” He further claims that the government will knock on the IMF’s door in the wake of the elections.
Just a few days to the elections, partners of the People’s Alliance (Cumhur İttifakı) AK Parti (AKP-Justice and Development Party) and MHP (Nationalist Movement Party) argue in the election rallies that the country faces a survival problem, while the Nation Alliance (Millet İttifakı), composed of CHP (Republican People’s Party) and IYI Party, and other parties assert that the real problem that country faces is economic grievances. CHP’s Vice Chair Aykut Erdoğdu likewise believes that the real issue is economic problems and impoverishment of the country. Erdoğdu answered our questions regarding the impact of fluctuations in foreign currency exchange rate on the economy, the real problem Turkey is facing, the causes and outcomes of economic recession, and the effects of domestic and foreign policy on the country’s economy for Halagazeteciyiz.net.
The government claims that fluctuations in foreign currency exchange rate are an indication of the positive atmosphere in the economy. What is your opinion of this situation?
The crisis in Turkey will not come to an end simply because the dollar has gone down. We have to import in order to be able to produce. But since we do not have money we cannot import, as a result there is little demand for foreign currency. Also ruinous interest is charged on the Turkish Lira, 5 or 6 times as high as world average— we pay an interest rate of 24%. People put out their money at interest. Saying “the currency rate is low, Turkey is getting better” in this case is nothing other than failing to understand the issue. It is another form of ignorance to say “We have current surplus, the crisis over.” We cannot import things at the moment because we cannot produce anything, because the production has plummeted. Since there is no import, the gap in the current deficit is dropping. There is no cash in the market; no one can get a loan.
While the Turkish economy grew at a rate of 2.6% in 2018, it shrank by 3% in the last quarter of the last year. How do you explain this?
According to the 3-mothly report of TÜİK (Turkish Statistical Institute) released in 2018, covering the October-December 2018 period, Gross Domestic Product (GPD) was 2.6%. This is nothing other than the official statement of the fact that the economy is in recession. In other words, there are no excuses behind which to hide. This is a very clear and obvious fact: the Presidential system has ruined the economy, hitting it with high unemployment, inflation and recession. Our citizens are paying the price for the Presidential system with unemployment and high cost of living. The presidential palace continues to flourish while the economy suffers from recession. The empty promise of growth rate of 3.8% in the New Economic Program (YEP) remained a dream only. There is a recession unprecedented in the last ten years. The economic recession this year is visible in the figures compared to the same quarter of the last year: 8.7% in construction and 7.4% in manufacture. What is more striking is that the recession intensified in the last quarter of 2018, for instance in the construction and manufacture sectors there was a shrinkage of 4.2% compared to the previous quarter.
Which sectors have been hit most apparently by the economic recession?
The data divested of seasonal and calendar influences demonstrate that the economy has shrunk by 1.6% in 3rd quarter of 2018 and 2.4% in the 4th quarter compared to the previous quarter. There has been a decrease by 13% in the gross fixed capital formation. Machine and equipment investment, which is one of the items in this figure, went down by 25% compared to the same period in the previous year. The gross fixed capital formation in construction, the leading sector, has narrowed by 5.8% in the last quarter. There is an aggressive recession in construction and manufacture sectors. The indicators suggest that construction is the most precarious sector. The industry sector too remains to be fragile. The momentum in export has seriously slowed down. Looking at these figures, we can say that we are seriously bankrupt.
Do you think the recession will continue?
The demand for certain products has gone down by 16% per annum. There is a similar course in the consumption of semi durable consumer goods. It is obvious that increasing the number of installments did no good. Domestic demand has crashed because of high inflation and credit cost. The decline in the purchase of durable and semi-durable consumer goods suggests that consumption served only to meet basic needs. Even the consumption of non-durable goods declined by 2.3% compared to the same period in the previous year. The government’s final consumption expenditure, on the other hand, made no progress, failing to compensate recession. All these figures show that the Turkish economy is going through a severe crisis. The reason why the global crisis hit Turkey profoundly in 2008-2009 was AKP’s lack of policies. Though there exists no such crisis on a global level, the Turkish economy is one of those suffering from shrinkage in late 2018, which means the government must be brought to account for this. If no precautions are taken we may face much weighty problems.
What sort of a change do you foresee in the economy after the March 31 local elections?
They [the government] will once again pour money so as to be able to win the elections. Pouring money will lead to inflation, further worsening the already ruined fiscal stability. If they lose the metropolitan municipalities, they will throttle people. Do not take this for a temporary sacrifice in the name of stability. They say “We have a surplus in the budget.” Why did the budget have a surplus?
Well, they have launched paid military service and zoning amnesty; and thanks to these they have rounded 25-30 billion liras. Despite this, they still have a deficit in the budget. This is a rather desperate situation.
What do you think of the attitude of Recep Tayyip Erdoğan, leader of AKP and President, who brings up the issue of the prayer rather than the economy in his election rallies?
The last ten years has been a time of empty talk. They have been trying to create all those fake agendas so that people do not talk about the economic table. Such lies and slanders as well as the “survival problem” and the prayer controversy serve to cover the bleak state of affairs. What is more, the crisis that we have been going through will not be a “V-shaped” one that will go down and recover immediately. Because this time more damage has been done to the real sector. Surely there are tax incentives, employment incentives and credit incentives financed by public banks; however, now there is the foreign currency that has rocketed by 40%, the inflation ranging around 20% and interest rates at around 20%. Still, no concrete steps have been taken, nor is there the intention to do so.
Vice President Fuat Oktay said that the dollar currency did not have anything to do with Turkey’s response to the US in terms of the Russian S-400 conflict. Do you agree with this explanation?
The dollar was 5.30 then it rose to 5.45. The Turkish Lira depreciated by 3% in two days. Such things do not work by instructions. The market keeps an eye on all developments. The interest rate is 24% and the repo 26%. They say the inflation is 19%. Though we offer a 7% higher real interest rate, no one agrees to loan us any money. Retrospectively speaking, the inflation is totally out of control. Food inflation has been 30% in the recent year. And fresh fruits and vegetables inflation is 46%. Around 1.5-2 million people became redundant. We have today 7 million people who are unemployed. It means that the price of everything imported by foreign currency will go up. Sadly, this is just the initial stage of the crisis. Unfortunately, the crisis will get much deeper. Erdoğan is intimidating everyone before the elections. This is something so thoughtless. You may have a palace and private plane but the man in the street has to buy tomatoes and pepper. The citizens suffer as a result of irresponsible doings of administrators.
In the economy lobbies the Treasury is said to have been burdened with debt. What does that mean?
Yes, our Treasury is constantly being burdened with debts. There is no money in the market and people lack confidence. The business is slow; checks are bounced. Those who have money rush in for the foreign currency because no one trusts their country. Foreign exchange deposit keeps swelling up. All tenders and businesses of partisans are in carried out in foreign currency. They tell the people in the street to change their foreign currency into Turkish Liras while the government and their supporters always head for the foreign currency. The government loan money from abroad and hand it in the Central Bank. Yet, I must tell this, the government do not shrink from disbursing progress payment of their supporters so that they may profit. The retired are not granted a pay rise. The workers and farmers do not receive anything either. They were supposed to get that money transferred from the Central Bank into the Treasury in June, but they snatched it by force in January. There is a fiscal deficit of 35 billion Liras. Despite plenty of monetary flow garnered from zoning amnesty and paid military service, the deficit in February is 57 billion Liras. What is the Treasury doing? Loaning continuously. Many foreign countries loan money only in return for very high interest rates since they think the Erdoğan government is much too risky.
Do you find the TÜİK (Turkish Statistical Institute) data on the economy are reliable?
No, never. The vice chairman of TÜİK was dismissed because the government could not get the results they desired. With this incident TÜİK lost all its credibility. Well, the chairman of TÜİK said to us (you can check the exact wording in the Parliamentary minutes), “We are a country in the Middle East, where lying is the rule.” We asked him to tell us about the accounts issue. He failed to provide us with trustable information. If TÜİK loses its credibility, how can anyone diagnose the economy? The patient is dying of economic crisis. This is the situation in our country at the moment.
President Recep Tayyip Erdoğan, who is also the leader of AKP, once called the people living in places run by CHP mayors “fat of the land” in one of the election rallies. How do you interpret this?
The people living in those districts, who Erdoğan refers to, are not the fat of this land. They are the educated Anatolian people who worry about the future of this country. If they are looking for the fat of the land, let them search the palace and its environs, let them search for corrupt people. They have attempted many times to divide our population of 81 million into such camps as Kurdish and Turkish, Alewite and Sunnite, secular and conservative, and so on. Now they are trying to divide people in terms of the neighborhoods. Our people should not tolerate such divisiveness. Such attitudes are alarming for our people as well as others in the world. Our mission must be to stop this horrendous state of affairs.
Do you think Turkey will knock on the IMF’s door after the elections?
It will. The heavy price after March 31 will be paid by the workers, villagers, farmers and pensioners of this country. The country is being led to an IMF package. No institution other than the IMF could afford such a gigantic bailout, which is exactly where the government is taking us. They will be given this IMF package and it will cripple every walk of life from wage earners to pensioners. If we fail to stop this terrible situation, we are doomed. If Turkey has a survival problem it is nothing other than the government and the awful economic policy that has been in practice for last 17 years.
Translation: Fahri Öz