The significance of economic stability for the coming elections

From the statements of Prime Minister Ahmet Davutoğlu and Cabinet ministers, we understand that special significance is being attached to maintaining economic stability until the parliamentary elections scheduled for June 2015. In other words, the government is aware of the significance of the economy to gain votes.

We understand that those managing the economy are taking into account the possible damage to the economy related to the danger of regional incidents spilling over into our country, as well as the uncertainty in global developments. This concern has not yet affected the newly announced Medium-Term Program and the 2015 budget equilibriums, but such a concern is being felt.

For this reason, one can observe that the relevant Cabinet ministers on the economy, despite the determined targets, have refrained from using precise language for the economic targets of 2015 and beyond. I have personally witnessed that even in private conversations they now avoid giving a clear reply to questions on expectations.

From the same conversations, I have gathered the impression that in the approaching elections, a campaign will be conducted arguing that one-party rule of the Justice and Development Party (AKP) is a must to maintain economic stability.

The government, which has also used this perception prior to previous elections, will increase the emphasis this time, as understood from the launch of such a campaign in advance. When expectations on the economy are asked, the answer is usually as follows: “Even if global and political factors have negative effects, if it is understood that the AKP government will remain firmly in power then we will overcome difficulties without much trouble.” It currently looks as if this line is part of a deliberate campaign.

Besides this, in order to generate confidence in the markets, the managers of the economy have also given special importance to creating the perception that “structural reforms will again be prioritized.” Within this context, it is known that a precaution package is being prepared with 1,200 items in 25 main chapters. They have started promoting this package now even though its content is not fully determined, while stressing that reforms are a must to maintain economic stability.

Indeed, while this message is being delivered to the markets, a message is also being delivered to President Recep Tayyip Erdoğan and his aides that “if these structural reforms are not done, then stability will be at risk.” The reason is that there are concerns that the planned measures may end up being blocked by Erdoğan.

Global effects

Well, how can economic stability be maintained in the lead up to the 2015 elections?

As a matter of fact, to be able to answer this question, one has to know how several factors will develop and reach fruition. In short, it is very difficult to answer. However, before anything else, we are able to say that global developments will be determinant. In other words, one has to know the timing of the FED’s interest rate increase, the course of the recession and renovation policies in EU countries, the level of growth in China, and the situation in Japan.

If these external factors develop negatively, then it means that the maintenance of economic stability is in danger because there has not been adequate preparation for such a period. It will be very hard for the upcoming package alone to prevent the panic likely to erupt from this. Besides, if an atmosphere of political instability spreads, the Kurdish resolution process enters danger, and ISIL terror becomes a domestic concern, then it will be difficult to maintain economic stability, even if external factors develop positively.