BY FATIH OZATAY
The Common Policies Text of the Nation Alliance announced on January 30 includes many goals for the economy.
The average growth rate will be above 5%, per capita income in dollars will double and exports will increase to USD 600bn in five years, according to the text. Inflation is expected to reach single digits within two years. Let’s assume that consumer inflation will be 45%. In this case, reaching the 9% level means a 37-point decrease. It is a goal that can be achieved in two years without overwhelming the economy. The text also emphasized that the credit rating will be raised to the investable level again. Foreign exchange (FX) reserves will be strengthened, the text promised.
To reach a significant part of the targets, the program to be implemented must first reduce the risk perception regarding the economy. This is subject to two conditions. First, the program should include elements that will ensure macroeconomic stability. Secondly, policy measures that will change the institutional structure causing the current situation in the economy should be added to the program.
The relevant sections of the common policies text contain sufficient elements to meet both conditions. The first three chapters of the text, (Law, Justice, and Judiciary; Public Administration; Anti-Corruption, Transparency, and Audit) were found to be largely positive by the experts. These sections include almost everything that needs to be done outside the economy to ensure confidence, make Turkey an investable country, and reduce the risk premium.
Secondly, in the economy section of the text, there are important structural regulations for institutions such as TurkStat, Central Bank, Banking Regulation and Supervision Agency, and Capital Markets Board so that they focus on their core duties by staying away from political concerns. A Strategy and Planning Organization will be established. The establishment of kindergartens and after-school activity centers to encourage women’s participation in the workforce, and tax and financing arrangements regarding green transformation are also planned. Third, there are important policy proposals aimed at establishing stability. Closing the FX-protected deposit accounts when the deposits in the system expire, not borrowing by the Treasury in FX, controlling every stage of the PPP projects and trying to reduce the burden on the budget in this framework, stress testing for banks, protecting the rights of the poor and the low-income, implementing a prioritized budget, not using the unemployment insurance fund for any other purpose… All of these are important steps towards stability. Closing the Turkey Wealth Fund is also an important step. There is also a tax reform proposal that tax experts welcome.
Of course, external conditions are also important. However, whatever the external conditions, Turkey must first take steps to correct its economy. The program is promising in this respect.
Leave a Reply