Analysis: when Erdogan’s Turkish economic miracle began to fail
- Electoral test scheduled for 2023, centenary of the Republic of Turkey
- 2013 marked a turning point after a decade of gains
- Declining equality, prosperity and employment measures
- President’s electoral base underpinned by health and other gains
ISTANBUL, July 15 (Reuters) – Five years after President Tayyip Erdogan’s coup, his chances of extending his rule into a third decade may hinge on his ability to reverse the economic decline that has seen the Turks prosperity, equality and employment fall since 2013.
Erdogan faces elections in 2023 – the centenary of the Republic of Turkey. Polls suggest its support has waned following a currency crisis, deep recession and the coronavirus pandemic over the past three years.
Some show that the ruling coalition lags behind an informal opposition alliance, even though Erdogan’s AK Party (AKP) remains popular, with a strong base among rural and labor conservatives.
This year, economic growth has rebounded after Turkey was one of the few countries to avoid a contraction in 2020. But damage in recent years has included a return to inflation of 20% or more on food and other commodities.
“If you look at President Erdogan’s poll notes in a tough economy, it’s pretty hard to imagine the conditions over the next 12 months for them to think an election looks favorable,” said Douglas Winslow, Director of European Sovereigns at Fitch Ratings.
The World Bank estimates that more than 1.5 million Turks fell below the poverty line last year.
And a Gini index of the distribution of income and wealth shows that inequalities have increased since 2011 and accelerated since 2013, erasing the big gains made in 2006-2010, during the first decade at the head of Erdogan. .
A DECADE OF PROSPERITY
Modern Turkey’s longest-serving ruler, the young AKP Erdogan, seized power in 2002 after the worst crisis since the 1970s by promising to end the mismanagement and recessions that had long frustrated self-conscious Turks. ‘a better life.
Then-prime minister Erdogan leveraged the economic rebound and a diplomatic pivot to the West to bring about a decade of prosperity.
Poverty and unemployment have plunged. Inflation which was in triple digits a decade earlier has reached 5%, making the Turkish lira more attractive to locals and foreigners.
Erdogan seemed untouchable.
Things started to change in 2013, when unprecedented anti-government protests swept Turkey and emerging markets around the world experienced a painful financial drain as major economies gained momentum.
Reuters analysis shows that this year marked a turning point for GDP per capita, unemployment and other measures of economic well-being.
The year 2013 was also the culmination of foreign investment, according to official bond holdings statistics and Turkey Data Monitor. The value of read has since plunged, undermining the global purchasing power of Turks.
REPRESSION AND ISOLATION
Erdogan shocked many when his government called off the 2013 protests that started in Istanbul’s Gezi Park.
The crackdown “crystallized the AKP as a new institution and showed that the popular current was turning against them,” said Ates Altinordu, assistant professor of sociology at Sabanci University.
The July 15, 2016 coup attempt then triggered a severe state of emergency that analysts say pushed the economic well-being of Turks further south.
“Since 2013, the AKP and Erdogan have decided to further increase authoritarianism, which has probably hurt the economy in various ways,” Altinordu said.
“They’ve entered a more isolated and centralized mode of decision-making, with less media freedom. So you probably end up making more political mistakes, you lose your responsiveness and there’s a lot more room for corruption. . “
Other key metrics such as healthcare remain strong after improving significantly since Erdogan took office in 2003.
As the austerity imposed under a 2001-2002 International Monetary Fund program eased, Erdogan adopted the free market policies required to join the European Union – then a central goal of the AKP.
The 2008-9 global financial crisis hit Turkey, but also led to a rush of investors looking for yield in emerging markets.
Cheap foreign credit contributed to a construction-fueled economic boom that saw the AKP win eight consecutive national elections.
Erdogan has a “base of adoring and loyal supporters (because) citizens enjoyed a significantly better standard of living than under the Kemalists for most of the 20th century,” Soner Cagaptay wrote in a report for the Washington Institute .
He noted that before Erdogan came to power, Turkey’s infant mortality rate was comparable to that of pre-war Syria and is now similar to that of Spain.
ECONOMIC AND POLITICAL STRAINS
But other well-being indicators began to squeal in 2013 when the US Federal Reserve’s suggestion that it could start removing stimulus sucked emerging market funds.
Political tensions subsequently escalated as Erdogan turned to nationalist allies and then won a referendum on adopting a presidential system that concentrated power in his palace.
Some key economic officials left the AKP to oppose the takeover. Analysts say cracks then began to appear in its policies, including pressure on the central bank to cut interest rates even as the pound swung into crisis in 2018.
The currency has lost 75% of its value against the dollar since 2013, more than half in the past three years. Many Turks are now choosing to store their wealth in foreign currency.
“On the political side, since 2013, we have the feeling that Turkey and the West are going their separate ways,” said Roger Kelly, chief regional economist at the European Bank for Reconstruction and Development.
“Yes, we have seen a deterioration since 2013, but we have to see it in the context of the positive steps that have taken place before that.”
Reporting by Jonathan Spicer; Editing by Catherine Evans
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