BY ALAATTIN AKTAS
The developments in Gaza have two primary effects on Turkey. One of them is the creation of economic problems.
The price of diesel fuel sharply increased after the conflict started. The hike in gasoline prices is in the wind.
Two factors pave the way for an increase in fuel prices. Product prices surge in the international markets due to the conflicts, and that reflects on Turkey. Even though product prices don’t rise, the hike in import costs raises domestic prices as the lira devaluation has accelerated.
The surge in fuel prices will directly and indirectly reflect on all prices. Some increase prices sharper by using this as an excuse.
The conflict doesn’t just affect inflation. Problems will appear in exports, especially to the conflict region, if the problem extends. That will also reflect on production to a certain extent.
The conflict spread to other regions, especially Iran, is the bigger problem.
WHO CARES THE ECONOMY
Forgetting about the economic problems or pretending to do so suits the government’s book. But I don’t think the government cares about that. What will happen if the economic problems are kept in mind?
Does the opposition give a hard time to the government?
For instance, the main opposition occupies itself with delegation.
Another party is busy with the discussion of what entered the Nation Alliance.
Some parties, which look like opposition parties, immerse themselves in Gaza and don’t care about what happens in Turkey.
Citizens were added to the parties as if the economy was all roses.
NEED FOR FX
The economy administration is the only one in the government that sees the trouble in the economy and is aware of that.
We don’t know if some await and hope investment inflow to Turkey, which neighbors instability in a period when there are concerns that the stability will affect the entire world. But we have to wait.
The policy rate has been 30% for a month. However, there are no foreigners and FX inflow. It means that this rate is insufficient. So we should hike the rate if we want foreigners’ inflow.
But which policy rate will attract foreigners to Turkey? Will 32.5% or 35% be sufficient? I won’t be surprised if a higher rate is needed.
If the policy rate remains unchanged or below 35%, we decided to manage like this as much as possible.
