Turkey must change expectatio­ns


According to respected economist Mahfi Egilmez, the 51 percent rate of foreign currency deposits to domestic currency deposits is a serious problem. “It is not easy to turn it back, but it is possible. Turkey achieved this after the 2001 crisis and can do it again. For this, Turkey has to change its expectatio­ns. Those who think that good things will happen will make investment­s,” he said. Here are his remarks:

The rate was 57 percent before 2001

“Prior to 2001, the share of foreign currency deposits in total deposits was 57 percent in Turkey. Turkish people did not trust their own money; the dollar was in excessive use. People were even asking for the dollar equivalent when we were talking about the budget deficit. Then the 2001 crisis emerged and Turkey agreed on a program with the IMF. The banking sector was completely overhauled. The Banking Regulation and Supervisio­n Agency was establishe­d. After that, the budget deficit dropped rapidly. Duty losses of the government decreased. When the debt decreased, interest rates fell because the state did not enter the markets. Inflation also fell. Turkey began to recover.”

Dropping 6 zeros from the currency and EU membership was promising

In 2005, Turkey took two important steps. Initially 6 zeros were dropped from the currency. Then full membership negotiatio­ns with the EU began. There is no other country that has started a full membership negotiatio­n with the EU but still has not a become member. Thus, money flowed from Europe to Turkey, $80 billion of investment­s in four years. Confidence in the TRY increased. But sometime after 2010, the mood shifted and negotiatio­ns with the EU faltered. The currency rose and foreigners started to leave Turkey. Just as we did in 2001, today, no matter how good a message we give for the future, we have to change expectatio­ns in a positive way.

People our region are used to high interest

“We entered January 2018 with 13 percent interest. The rate did not stop there and went up to 27 percent and is currently at 18-19 percent. This is a very high rate and needs to be corrected by changing the infrastruc­ture. Some 4,000 years ago, some 30,000 tablets found in the Bronze Age in Anatolia were debt tablets. We can calculate the annual interest rate from the traders’ borrowing tablets: it was around 130 percent. So our region is accustomed to high interest. It is in our hands to correct this.”

The worst is zero inflation and zero nterest

Since we Turks have never seen zero inflation and zero interest in our lives, we think that it is a good thing. This is our ideal. However, it is the worst thing in the world. Japan has suffered a lot from this. Nobody bought anything, because Japan is traditiona­lly a savings society. So the economy got stuck. This is why the U.S. and Europe want to create inflation of around 2 percent. In the 1980s and 1990s, six of the world’s top 10 banks were Japanese banks. None of them exist today, because there’s no mobility.

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