Post-election period still troubled
Election tensions are done for a while. The next elections, which will be held in March 2019, won’t create that much uncertainty and tension but we will go through a process where tensions are still relatively high. Such a process would not affect us under ordinary circumstances but this time it is a different case. The difference is rooted in the current economic conditions of Turkey. The horizon in the economy seems troubled.
If the troubles that dog us today were solely domestic, it would be a little easier sole them. However, there are problems and threats that hang above us from abroad as well. But I don’t mean the geopolitical issues and hot conflicts that have been going on for a long time in the region for the past several years.
On top of that, there are a number of new problems that directly threaten our economy. One of them is the U.S. Federal Reserve and its new initiative for monetary tightening; that will become increasingly intense. If conditions were normal, this may not affect us. But after a long period of monetary easing, this turn in monetary policy will distress every economy, especially the ones addicted to hot money, just like us.
Monetary tightening will put pressure on speculators, increasing risks. Foreign exchange rates will rise, interest rates will increase and the economy will slow down. The first steps of this process have already begun to be felt as volatility in prices.
The Fed’s interest rate hike is not a short-term thing. This will have consequences for us. This reversal of the monetary policy of the United States will restrain our economic policy implementations for a long while and that will trouble us.
It’s not only monetary tightening that affects us badly from abroad. A fresh problem led by the United States has come to the fore: The trade war. This is a multifaceted action focused on a few countries. But there is a risk of contagion and this may become a global trade war. Regarding its economic effects, a trade war has two sides. As trade tensions pressure the world economy with inflation, there will be a dynamic where stagnation becomes rooted. This is called a stagflation crisis.
These two vulnerabilities of Turkey, which resulted from an election environment and have become more fragile, should be managed accurately and carefully.