Difficulty takes the place of stability

The foreign policy of the Justice and Development Party’s (AKP) single-party rule is experiencing serious failures. While sharp turns have been made in foreign policy recently, the increase in the number of countries, primarily Russia, that we have problems with is causing added difficulty in economy as well as politics.

While the plane crisis with Russia takes new forms every day, the crisis with Iraq was moderated by the government taking a step back. With the effect of the latest developments, domestic political and economic issues are accumulating. All of this will surely restrict the governing capacity of the government in the term ahead.

The AKP, as well as keeping its pledges, also said it would be a reform government but concerns have grown that it will take radical measures. The necessary resources to do what needs to be done in the economy are restricted and also with the effect of the growing domestic clashes, the reconciliation platform needed for political reforms is weakening.

This situation has started becoming visible in surveys as well. The consumer confidence index that was high in November declined by a serious rate of 4–5 percent in December. In the survey, economic expectations of households for the year ahead have fallen sharply. 

In other words, the optimistic atmosphere stemming from the re-introduction of the single-party rule in November has immediately dispersed because of ongoing incidents and rising problems. Despite the government’s announcement of pledges to be met and reforms to be made in a calendar of three month periods, the fact that confidence has eroded while the government has just begun, if viewed from another angle, is an indication of how tough the job of the government is. 

Difficulty of the budget

No doubt, the growing political and economic consequences of the Russian crisis and what is ongoing in the southeast are playing an important role. 

However, even if these had not happened, from the economic angle, there are concerns that all the announced reforms and pledges will be done. Deputy Prime Minister Mehmet Şimşek said the bill of the pledges made was 22-23 billion Turkish Liras. The extra burden of 12-13 billion liras of the 6 percent plus 5 raise for civil servants should also be added to this. Another extra load to the state from the increase in minimum wage has to be included in the budget too. 

TOBB head Rıfat Hisarcıklıoğlu said SMEs in particular will not be able to handle the increased burden of the minimum wage, as two thirds of SMEs’ profits will gone because of this hike. For this reason, he adds, the state should absolutely shoulder the increased burden. Prime Minister Davutoğlu has said the increased burden will be assumed by the state but as of now, there has been no clarification on how this will be done. 

Thus, the additional resources needed for the 2016 budget are about 50 billion liras. If the government resorts to loaded price hikes to find resources, this would disrupt balances, starting with inflation. 

All of this clearly shows that while expecting stability, things are increasingly getting tougher.