Next time it will be the economy

There are two types of countries in our region: Countries where you know the results of an election before votes are counted and those where you have to wait for the tally. Some may have had their doubts about where Turkey is placed in that categorization, but last week’s vote clarified things. Democracy is still breathing in this country. Good for us. 

Now is the time to once again prove the impressive mechanics of the Turkish electoral system, with the Supreme Court of Elections (YSK), the ballot committees headed by civil servants, the active participation of all political parties in the vote-counting process and thousands of volunteers openly observing how the ballots are counted. The demands for recounts in major cities only show the extent of the surprise. If the election results surprise the party in power, so much the better. As proof of the pudding is in the eating, the proof of democracy is in the ballot box surprising those in power. It is now the job of the judiciary to put to rest all remaining doubts. This has been a strong test for the rule of law in Turkey and very timely, if you ask me.  

So much happened since the last local elections in 2014. We have gone to the ballot box six times since: Three general elections, a referendum on presidential system, and two presidential elections. We even had a failed coup adventure in 2016. 

With so much going on, it was hard to focus on the problems of the Turkish economy. Since last year, the lira depreciated around 40.5 percent, the inflation rate jumped up to a 19.7 percent plateau, interest rates hiked up to 25 percent and unemployment is pushing towards 13.5 percent. Elections, it turns out, do not create an environment conducive to the making of tough economic decisions. The Erdoğan government focused on economic measures to ease the pain of the voters before elections, but still lost votes to it. The governing coalition’s overall votes (only counting mayors, excluding metropolitan municipalities) was at 49.99 percent on Sunday, down from 60,87 percent of 2014 local elections. If the economy keeps tumbling like this, it will only lose more popularity. That is why it must now go structural, and turn its attention to the real economy. 

Why? Turkey has a credit-driven economy and a severe domestic savings shortage. Quantitative easing in the world’s major central banks has led to unsustainable corporate debt build-up over here. The recent relative economic normalization in the West has brought to light this weakness in Turkey. What goes up eventually comes down. Now the country needs a multifaceted plan to deal with the problem. 

I see five items on Turkey’s to-do list. First, restore macro and financial stability. Wonder why any good news about the health of Turkish banks is creating so much fuss in the market? It is telling. Second, take structural measures to jumpstart a new growth process. 

Turkey liberalized its manufacturing industry in 1996 with the decision to join the Customs Union. Now is the time to focus on liberalizing the services and agriculture sectors, and that’s what customs union modernization is about. It’s often cited in a political context, but is really purely technical in nature. Third, enact an administrative reform process. 

The current presidential system is not working due to design and operational problems. These need to be fixed. Fourth, Turkey needs measures to improve the rule of law. Putting these election results behind us would be an exemplary step to such measures. Fifth, Turkey needs a sound PR program. Turkey’s image internationally, and especially with its treaty allies, lies in tatters. Any reform program needs to address this as a separate issue.

None of this is easy, but it’s all doable. What if the government refuses to do it? An unprecedented multi-year recession could ensue, making things all the more difficult for everyone. What should we have learned so far? You cannot heat your home by burning dollars. You need a proper heater and find some gas.