TR Monitor

The election is over; what will come up next?


Recep Tayyip Erdogan is the winner of the May 28 PRESIDENT election. Erdogan will lead the execution for another five years.

The question is simple: “What kind of economic course does Turkey await?

No change in the monetary policy and even policy rate cuts are mentioned. What will happen in the markets in the upcoming period?

The implementa­tion to stabilize FX rates started in August 2022. The stabilizat­ion became more difficult as May 14 approached. The difficulty increased further as the election had the second round, and these policies had to be implemente­d for another two weeks.

The Central Bank’s reserves have never been low and fallen to negative that much to date. So, this problem needs to be solved. But how?

FX rates will unwillingl­y be released and slightly increase in this process.

The government cannot make radical decisions as the next goal is to take back Ankara and Istanbul in the local elections next year.

A rapid FX rate will not surprise anyone today. Even if the Central Bank wants to intervene, it doesn’t have a gun to fire. When the hike starts, and if it is desired to be held, nothing much can be done as there is no FX.

The policy rate hike is insufficie­nt alone. The urgent announceme­nt of the Cabinet and a perfect economic program may slow that rapid hike, and even it may stop it.

Therefore, everything should be done quickly. It is also necessary to give confidence to the society. But this isn’t easy.

Money is needed to keep the promises which were given before the election. Moreover, billions of Turkish Liras are needed for the quake-hit region.

How will this money be found? Three resources will be applied, according to the initial informatio­n. One of them is the tax on companies’ assets. The rate is unknown. This issue is discussed as a draft. The hike in the motor vehicles tax and the real estate tax are the two other resources on the agenda. Citizens will be affected by this directly and indirectly. The burden on firms will reflect in prices.

Prices continued to increase, although FX rates, which have been pressured since August 2022, did not increase that much except for the last month. If the FX rate hike steps in, prices will have a faster upward trend again.

The monetary expansion to stem from the promised high salary increases and the minimum wage hike will also raise prices.


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