Going Cold Turkey?


Author: Tanya Rawat

Published in Global Risk Insights

İstanbul’u dinliyorum, gözlerim kapalı
Önce hafiften bir rüzgar esiyor;
Yavaş yavaş sallanıyor
Yapraklar, ağaçlarda;
Uzaklarda, çok uzaklarda,
Sucuların hiç durmayan çıngırakları
İstanbul’u dinliyorum, gözlerim kapalı.

These lines are from a beautiful poem by Orhan Veli Kanık which translates to:

I am listening to Istanbul, intent, my eyes closed;
At first there blows a gentle breeze
And the leaves on the trees
Softly flutter or sway;
Out there, far away,
The bells of water carriers incessantly ring;
I am listening to Istanbul, intent, my eyes closed…

The Black Sea on the North gently caresses Constantinople (present day Istanbul) via the Strait of Bosphorus, Aegean Sea kisses the shores of Smyrna (present day Izmir) on the West and the Mediterranean Sea bathes Antalya in the South. Geographically magnificent, people with genteel attitudes and gracious hearts, Turkey is an enigma.

My ideal kahvaltı (Turkish breakfast) is a plate of beyaz peynir, zeytin, sucuklu yumurta, butter, honey, sliced tomatoes, cucumber, some börek and Turkish tea. If this sounds rich to you, the history is doused with even more flavour and aroma, as one tries to flip through the pages of Byzantine and Ottomon Empires.

After the Ottoman’s faced defeat in World War I at the hands of Allied forces, a brave Turkish military officer who served during WWI led the Turkish War of Independence against Allied occupation and is credited with founding the Republic of Turkey. He was bestowed with the title Atatürk meaning ‘Father of the Turks’. He is Mustafa Kemal Atatürk who wanted a modern Turkey, wanted to embrace tolerance, wanted an open-minded society, wanted secularism. However, maybe he went a wee bit far and too swiftly in trying to change a country with deep Muslim roots by challenging its Muslim ideologies such as banning headscarves in public because he disdained a society prejudiced on the basis of what religion or practices one followed.

Subsequently, to his detriment, right-wing parties took advantage of this position and tried to exploit this during a rather tumultuous phase for Turkish politics during the 90s wherein Islam was ‘reborn’. The common Turks had enough though as the Lira depreciated alarming and inflation reached astronomical figures. The Turkish economy was hemorrhaging when a minnow emerged victorious in the 15th Turkish General Elections; the AK Party. It talked about European Union membership and it spoke moderately. Led by Recep Tayyip Erdoğan, it was indeed a watershed moment for Turkey. This was the paradigm shift it desperately needed. His era saw income per capita rise to $10,900 from $2,000 since the early 1980s, double digit inflation figures of 65% which plagued 80s and 90s fell off a cliff to ridiculously normal levels.

Foreign exchange reserves excluding Gold grew from $4bn in the early 80s to $110bn. Government debt has fallen from 80% to ~35% of GDP. Structurally though, problems persist. While the Foreign Direct Investment remains constant at 1.5%, Current Account Deficit (% GDP) continues to dwindle downwards, averaging  -6%. The chronic low savings rate doesn’t help either; averaging 15% in the 21st century versus a world average of 23%. It has to rely on external funding of which short-term external debt (% reserves including Gold) is dangerously high at 98%. With an imminent interest rate hike by the Federal Reserves, Turkey remains vulnerable to hot-money outflows.

Erdoğan now needs to see the light of day. After taking up position as President of Turkey (a merely ceremonial position) post exhausting his term as Prime Minister in 2014, he had hoped AK Party to win the June Parliamentary elections 2015 to tweak the constitution enabling the President greater powers. He is a visionary, yet visionaries too sometimes lose their way. Here is man who by his mere beliefs changed Turkey and today post elections, he is faced with the prospect of going Cold Turkey (the term Cold Turkey implies abrupt and complete cessation of taking a drug to which one is addicted) on 13 years of unadulterated, absolute power. He needs to make peace with it.

Turkey needs less populist policies and more austerity, less interference in the functioning of the Central Bank thereby restoring its credibility in the financial markets and eyes of the investors, policies encouraging savings rate in a country whose demography is its strength (average age is 29 years old) and to preserve what Atatürk and Erdoğan dreamt of – a strong, educated and secular country whose strength is its calm yet resilient demeanour.

İstanbul’u dinliyorum, gözlerim kapalı..

Sharma, R. 2012, Breakout Nations, Penguin Group, London.

International Monetary Fund. Available from: <http://www.imf.org&gt;. [13 June 2015].

Trading Economics. Available from: <http://www.tradingeconomics.com/turkey/inflation-cpi&gt;. [13 June 2015].

World Bank. Available from: <http://www.worldbank.org&gt;. [13 June 2015].

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