Turkish economy's test with the dollar - ERDAL TANAS KARAGÖL

Turkish economy's test with the dollar

The questions, "What is going to happen to the dollar?" "Why is the value of the dollar increasing?" "What should we do to prevent the dollar value from increasing?" are critical questions that I am frequently faced with and attempt to answer.

I need to note that we cannot explain the dollar's value increase or the Turkish lira's value decrease with economic indicators or economic justifications alone.

Because while the value increase in the dollar happens due to the production structures of developing countries like ours, external deficits, low savings and fragilities that emerge as a result of these, outside shocks, grading statements of assessment agencies, the high interest rises in developed countries and speculative capital movements have a significant share in this.

Shouldn't those who turn up their nose at the mention of outside shocks or when it is said that it is an operation finance circles are trying to deepen, be asked what the efforts to create a chaotic atmosphere in Turkey, which have gained speed in the last three years, the coup attempt and outside shocks mean?

Is it not clear that the things we have experienced in the last three years have been playing a major role in the problems Turkey's economy is currently facing and the siege?

So, looking at the boom in the dollar, is Turkey going to give up the economic gains it achieved in the recent years, its prominent position in energy and transport and its geographical position – in other words, its geopolitical advantage – between the East and West, and surrender to the economic chaos atmosphere that is trying to be created?

Of course not.

Turkey will break this siege, too

While Turkey, whose economy is intertwined with the world's economy and primarily integrated with the international finance system, makes the most of the international finance system's advantages, it should form “safe airbags” for itself to not surrender to the problems it will face and problems caused by this system.

It is better understood today how necessary these safe airbags are for Turkey to become a great economic power, for the economy to get out of this siege, for the required large-scale investment projects to reach completion and for it not to surrender to that which is imposed by the financial system.

The most important of these safe airbags is that the budget deficit and the share of public debt within the national income is low. In other words, strong public finance.

The main reason of the economic crises Turkey experienced in the past years was the budget deficit and the high rate of public debt within the national income. Because it is almost impossible for an economy with these two indicators being high to protect itself in a small turbulence.

Was it not the weakness of these indicators that led Turkey to experience so many economic crises in the past, to make 19 agreements with the IMF, reschedule debt 15 times and be obliged to live with the IMF for years?

Now, the greatest advantage of Turkey's economy is to be good in these fields. We have already seen the kind of advantage this provided in the 2008 global economic crisis.

While many economies with high amounts of public debt and high budget deficit are reaching the point of bankruptcy, the global economic crisis, as it was put by President Recep Tayyip Erdoğan, bypassed Turkey's economy and Turkey is a country that is still continuing to grow since the last quarter of 2009.

Turkey will shortly overcome this economic siege, too, with its strong public finance and without damage.

Savings, savings, savings

The other most important airbag for economies is high savings. Unfortunately Turkey's savings is low.

The most important factor leading to the rise of the dollar against the TL today is the low rate of savings. The reason for the recent siege of finance circles through the exchange rate is external deficit and our low savings. Finance circles using the weak spot of the country's economy, are using our obligation to become indebted in the international finance system and speculatively increasing the value of the dollar.

On the other hand, the inability to follow through with large-scale infrastructure projects that could not be implemented or postponed due to low savings, is leading the country to constantly have an external deficit and the economy to go through a vicious circle in this field.

Hence, savings-increasing policies as well as all companies – state institutions in particular – are to make their dollar- or euro-based transactions in TL during this period; thus, reducing the demand for foreign currency, are critical.

This policy will also be an important source of motivation for the public to stay out of the dolarization process.

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