How far can the economy go without political stability? - ERDAL TANAS KARAGÖL

How far can the economy go without political stability?

After the political scene that emerged on June 7, Turkey witnessed a process to form a government which it hasn't experienced for a long time.

When the political uncertainty that emerged in this process merged with the clashes going on in our neighbors and the global economic conditions, recently the US dollar fluctuated.

That's why; it is not true to link fluctuations of the markets with not realizing the AK Party and CHP formula that has been seen as the strongest option to form a coalition.

The uncertainty after the election is not an uncertainty to form a coalition. It is the uncertainty that according to the election results a government could not be formed.

Because June 7 results could not form a reasonable coalition. Was a coalition being waited from the AK Party and the CHP which were totally different from each other, especially on the economic issues?

Was it believed that a coalition with the MHP, that said “no” to everything the AK Party proposed, would be formed or would a formula like CHP+MHP+HDP that would never come together come true?

Political uncertainty threatens the economic stability

The effect of politics on economy is an undeniable reality for the developing countries. In real terms Turkey also experienced the positive reflection of the political stability on economy that was built after 2002.

Very serious progresses were made in all areas of economy with the power of the positive tendency of the political stability and a strong public support.

Although faced several times with shocks, the strong stance of the country's economy was protected. In a country that is used to economic crises and adjusts to the economic activities, for 13 years we haven't witnessed a crisis other than the crisis rumor spread by the economic crisis barkers. Because there was a strong political power then.

After the June 7 election, even if in a period that the question “What will happen?” hits the ceiling, the economy continues to preserve its power.

But till when will this situation continue? Relying on the strong economy giving election promises has no cost, but the political uncertainty has a strong cost on economy.

The fluctuation of the US dollar triggered by the factors besides the political uncertainty, the clashes going on among our neighbors, global economic conditions and the possibility of FED's increasing the interest rate or TL's losing value may be good for the exporters.

But, in order to produce, the need for the intermediate goods that are paid for with foreign exchange, namely increasing the importation depending on the production poses an important risk.

Also, while trying to decrease the high risk premium, this situation may lead to increase our risk premium again and may negatively affect many variables as the credibility of economy.

On the other hand, the TL's losing value will cause to decrease the income of the workers, retirees and government employees, who take place in the sub and middle income group, and since all the economic indicators are calculated by rating them to the gross domestic product (GDP), it will cause the country to be in an undesirable place in the list of the international comparisons.

Reforms become more important

Not to experience the viscous circle we experienced in the previous years, mitigating the negative effects of the “political uncertainty” which was caused by the global economic conditions and the developments in the region, it is obvious how the “Structural Transformation in the Economy” reforms are important which were started by the AK Party a year ago.

Notably the structural transformation, although there are a lot of reforms which have to be implemented, and unfortunately the political uncertainty cause to lose the gains which were obtained with great difficulty and drags the economy into a different process.

That's why, in this period the possibility of the early election increased, the economic performance of Turkey in the past and the existing economic conditions after June 7 and the expectations about the future have to be analyzed well.

The truth is, without the support of a strong nation behind, namely without the political stability, it is not possible to implement the best economic formula you could find. That is why; it is the trust both the markets and the actors in the economy need. It is the reformation of the political stability that will build trust.

That's why, in order to disperse the gloomy clouds in the economy caused by politics, the road map for the early election should be drawn without losing time.


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