While our country is going through a very critical period economically, on the other hand, it is going through a critical election period from a political point of view. At a time when the IMF warned of the possibility of a new and severe global crisis, the economic developments to be experienced in the post-election period and the economic steps to be taken by the administration to be elected are of great importance for the future of the country.
The developments in the past two years have caused the exchange rates to become a psychological indicator of the economic situation, together with the cost of living in the eyes of the public. Knowing this, the government's artificial suppression of exchange rates and the loss of fiscal discipline due to the electoral economy show that a critical period will be experienced in terms of the country's economy after the election.
According to the general acceptance of economics, the depreciation of the currency in a country is expected to increase exports and positively affect the foreign trade balance. However, despite the extraordinary increase in exchange rates in the last 1.5 years, despite the suppression of exchange rates in Turkey, the foreign trade balance continues to deteriorate.
In January 2023, the monthly foreign trade deficit increased by 38.4% compared to the same month of the previous year, breaking a record and amounting to 14 billion 237 million dollars. Our imports are constantly increasing because, as we have mentioned in many of our articles, Turkey continues to be a country that produces and exports low-value-added products in production and imports high-value-added products, and tends to run more deficit day by day.
At the same time, as a result of the suppression of interest and foreign exchange, the fact that high value-added imported products have become commercial investment instruments for investors who borrow in TL at relatively low interest rates and buy foreign currency at the suppressed exchange rate can be expressed as one of the reasons for the deterioration of the foreign trade balance. At a time when we have deep structural problems economically and the world is plunged into a major and planned crisis, the steps to be taken by the government as a result of the elections are of great importance.
Considering the election promises made by the alliances in our country, which is going to the elections with a bipolar separation, some of the promises made about the economy seem to cause an even worse picture, let alone improve the economic picture.
Politicians promise large sums of investment and financial support to the country for the post-election period. First of all, it should be known that international investors and financiers do not accept to provide investment and financial support to an economically critical country like us without the possibility of making a huge profit.
On the other hand, if there is a high amount of foreign exchange inflow to the country as promised, it may occur as a result of a further decrease in the already suppressed exchange rate in the short term. This situation, on the other hand, may result in a further deterioration of the already corrupt foreign trade balance and current account balance. Another critical issue regarding the post-election process is the steps to be taken regarding the interest rate policy.
By ignoring the wrong economic policies implemented since 2002 and the structural problems caused by these policies, the understanding that puts the policy of interest rate cuts on the basis of the economic problems experienced today argues that the policy rate should be increased after the elections and the inflation rate spread should be narrowed.
Considering the possible economic staffs of both alliances, a serious policy rate increase after the election seems likely. As we have repeatedly stated on this subject, the policy is not the reason for the policy of lowering interest rates. It was only the result of accumulated structural problems that triggered the crisis. In addition, the rapid increase in the policy rate to close the inflation-interest gap is likely to create undesirable effects such as increased unemployment and decreased investments.
The economic problems we experience are the product of the economic/financial system that dominates the world. There is a crisis in the nature of the current system. For this reason, it is not possible to solve the crises with the memorization of orthodox economics teachings.
The solutions put forward within the framework of the system that created the problem cannot go beyond being solutions that provide short-term improvements but cyclically drag us into crises. In line with our country's own conditions and needs, it is possible to take original, reasonable, scientific steps and implement solution proposals.
As long as that mentality transformation is ensured and qualified staff who are mentally freed from the shackles of the current system can be at work.