Turkish Economic Expert to Al-Estiklal: Erdogan's Government is Promising and Will Overcome the Current Crisis

Turkish economic expert, Abdulmuttalip Arpa, stated that the new government of President Recep Tayyip Erdogan holds promising prospects as it demonstrates coherence and coordination. He believes that this government is capable of steering Turkiye out of the current crisis and achieving significant economic growth.

Arpa, who is the head of the Islamic Economics Department at Istanbul Sabahattin Zaim University, explained that President Erdogan had pursued an election-oriented economic policy, costing the government approximately 50 billion dollars. However, the situation is now changing.

In an interview with Al-Estiklal, Arpa added that the Turkish Central Bank had intervened to stabilize the exchange rate of the local currency at around 18 Turkish liras per U.S. dollar throughout the year. However, it has now started to return to its true value, which will soon revitalize the economy.

Arpa further emphasized that the political stability achieved by Erdogan’s victory in the elections is crucial for economic stability. It is expected that “we will witness remarkable economic prosperity in the next five years.”

 

Economic Burden

 

1. What is the nature of the economic challenges facing President Erdogan after his election victory?

 

Abdulmuttalip Arpa: President Erdogan had been pursuing an election-oriented economic policy for some time, opening new files, most notably early retirement and other policies that cost the Turkish government around 50 billion dollars.

This policy posed an economic burden on Erdogan, prompting him to seek relief by entrusting the file to the former Minister of Finance, Mehmet Simsek, with the aim of mitigating it to some extent.

Today, everyone is eagerly anticipating how Turkiye’s economic approach will unfold with the return of Minister Simsek. Will Erdogan continue his policy of reducing interest rates and focusing on domestic production, or will he adopt a Western economic policy?

The Minister of Finance has explicitly communicated his stance, indicating that he insisted Erdogan refrain from interfering in the economic file. Given this, will Erdogan reconsider his approach and lean towards a Western economic approach that permits an increase in interest rates? This represents the most significant challenge confronting the Turkish economy.

Minister Simsek emphasized the need to integrate with rational Western economic policies and align with them by increasing interest rates, as well as earning in cash.

This is an interest-based policy that Erdogan opposes because it will lead to a reduction in production and an increase in imports at the expense of exports.

Western financial institutions expect interest rates in Turkiye to rise from 8% to 20%, while U.S. banks want it to be around 40%.

A new Central Bank President, Hafize Gaye Erkan, has been appointed, but she has not yet outlined her comprehensive plan.

However, Erdogan had stated the opposite, saying that we will stick to our economic policies. Thus, we will see what the future holds and which approach will be implemented: Erdogan’s vision or Simsek’s?

 

 

2. Why does the collapse of the Turkish lira against the dollar continue despite the appointment of a new Minister of Finance?

 

Abdulmuttalip Arpa: There was an election-oriented economic policy and intervention by the Central Bank to stabilize the exchange rate of the lira at 18 throughout the year by injecting hard currency into the market.

When the minister stopped the Central Bank’s intervention, the exchange rate increased, with the market rate being 2 liras higher than the bank rate, and now the lira is left at its true market value.

Exporting companies were affected by the policy of stabilizing the exchange rate.

However, the increase in the exchange rate represents a burden on the value of protected deposits in Turkish banks, amounting to around 2.5 trillion liras.

While the policy of a higher dollar exchange rate poses a financial burden on the lira and will cost the Turkish economy significantly, it will also encourage exporters to cover this deficit, which could lead to a balance between the increase and the deficit.

Everyone is now waiting for the comprehensive plan of the Minister of Finance after the appointment of the Central Bank President, as Simsek is a trusted figure in the British economy, which will open up relations with international financial institutions.

But there is a very important note in this matter: President Erdogan did not dismiss the former Central Bank Governor Sahap Kavcioglu entirely but issued a decision to appoint him as the head of the Banking Regulation and Supervision Agency (BDDK).

This means that Erdogan wants to strike a balance between his economic vision and the new minister’s vision, as this institution will monitor Simsek’s policies and the Central Bank President.

Erdogan will also bear the cost of these new policies, as his focus is on reclaiming the municipalities of Ankara and Istanbul, and he seeks to win them without incurring an expensive economic bill or losing these cities.

Therefore, he will seek mechanisms and tools to balance between his economic policy and Simsek’s interest-based policy, which may lead Turkiye into significant difficulties in the coming period.

It is worth noting that Turkiye is now entering summer, a period of significance for its economy, marked by vibrant tourism and increased production activities. This phase is expected to bring favorable revenues for Turkiye, benefiting the country’s current economic situation.

However, the true results of the economic situation will become apparent in November 2023 after the end of summer.

 

Prospective Prosperity

 

3. Despite securing a majority win, does Erdogan’s regime still face potential economic risks?

 

Abdulmuttalip Arpa: There is no doubt that the political stability achieved by Erdogan is crucial for economic stability. Therefore, we can expect economic prosperity in the next five years.

We have begun to see positive Western statements following Erdogan’s victory. The European Union has started reconsidering its policy towards Turkiye in the coming period. Similarly, the United States, China, Russia, and Middle Eastern countries have welcomed cooperation with the new Turkiye under Erdogan.

French President Emmanuel Macron confirmed that his country has started reevaluating its relations with Turkiye and intends to resolve regional Mediterranean issues together.

Putin stated that he would reorganize the new world order through cooperation with Turkiye. Even the United States, with its President Joe Biden, mentioned important matters and expressed eagerness to speak with Erdogan for cooperation.

All international organizations have begun reconsidering their dealings with Erdogan. Turkiye is a pivotal state in the region, and no power, whether Western or Eastern, can abandon it.

This political stability of Erdogan amplifies Turkiye’s pivotal role, which will undoubtedly be followed by economic prosperity.

Optimism arises from the cohesive, coordinated, and proactive approach of the new government, coupled with its pursuit of domestic and international economic projects.

These projects can lift Turkiye out of its current economic predicament and achieve a significant economic leap.

Erdogan aims to secure Turkiye’s position among the top 5 economies in the world. Therefore, he has established numerous projects over the past 21 years, all of which are now starting to yield results.

The best outcomes of these projects will be invested in at this stage, whether they are massive defense industry projects, such as the production of drones, tanks, and advanced weapons, or energy production and energy transport stations between the East and the West. Projects involving bridges, airports, hospitals, and more will make the upcoming phase a phase of opportunities rather than crises.

 

4. Is it true that Erdogan is facing attempts of economic coup after the failure of military and political attempts?

 

Abdulmuttalip Arpa: We know that in Turkiye, there is an important reality: The government can be overthrown in two ways. One way is through a military coup using the power of tanks, as in the 2016 failed coup. The United States and the West were behind the coup attempt, but they couldn’t get rid of Erdogan through this method.

Alternatively, there is the “pot coup,” by creating a crisis within the kitchen of the Turkish citizen, suffocating and weakening the economy to incite the Turkish people to revolt against their government.

Therefore, they started pressuring the Turkish economy. It is no secret that when U.S. President Biden won, he stated that Erdogan must be ousted from Turkiye by supporting and financing the Turkish opposition by any means necessary.

They also tried to impose financial and economic sanctions on Turkiye. They were bothered by the Turkish country’s regional power emerging in Africa, Europe, Asia, Syria, and the Eastern Mediterranean, but they failed to overthrow Erdogan. Today, they are forced to deal with him.

 

 

The Century of Turkiye

 

5. How is Erdogan laying the foundation for the Century of Turkiye vision?

 

Abdulmuttalip Arpa: There is no leader in the world other than Erdogan who can meet with Russian President Putin and Ukrainian President Volodymyr Zelensky on the same day, with both parties fully welcoming his mediation efforts. Today, Erdogan is the strongest mediator between the East and the West.

He achieves this by implementing projects and plans that leverage political stability and political will as the biggest asset for developing plans and executing projects during these five years while all neighboring countries are experiencing instability, wars, and challenging economic conditions.

In addition to Turkiye’s defense industries and its strategic projects in military and industrial technology, Turkey’s strategic location between the East and the West positions it as a hub for connecting and linking most of the global energy lines between the West and the East. Putin intends to send Russian energy through Turkiye to Europe, and pipelines have been established for this purpose.

Moreover, Turkiye’s recent discovery of energy resources has made it a significant player in the global energy market, and it has started to rely on itself in the energy sector.

Turkiye has discovered around 3 trillion cubic meters of gas and energy, and it has reconciled with all neighboring countries without exception, forming alliances in the Mediterranean to capitalize on this massive energy reserve.

 

6. Do you see any economic implications for Hakan Fidan assuming the position of Minister of Foreign Affairs?

 

Abdulmuttalip Arpa: Hakan Fidan is a man with military, security, and intelligence experience, and now he adds political and diplomatic expertise to his profile. Hence, he can be considered one of the most prominent Turkish political figures.

In Europe, he is known as the man who knows everything, and everyone is concerned about meeting with him because he is a deep, influential, calm personality capable of steering discussions in favor of his country. This greatly enhances Turkiye’s foreign strength.

Fidan bears a significant resemblance to Putin, and he possesses control and will strengthen Turkiye’s position on the international stage. He will handle sensitive and hot issues, such as Greece, Syria, Libya, and others, with deep rationality. He has been present in those files and has been part of the negotiations before.

 

7. Is it possible for him to be Erdogan’s successor?

 

Abdulmuttalip Arpa: A growing notion within Turkish political circles suggests that President Erdogan is grooming Fidan as his potential successor, exhibiting profound trust in his abilities. It is observed that no other figure within the Justice and Development Party possesses comparable qualities.

This topic is being discussed in many forums, and there is no figure as powerful as Fidan, who also enjoys widespread popular support.

 

 

8. What economic outlook supports Erdogan’s plan to reclaim Istanbul and Ankara in the upcoming 2024 local elections?

 

Abdulmuttalip Arpa: The formation of the new government has some very important and sensitive implications in the Turkish domestic arena. We have seen that the opposition, with the help of the pro-Kurdish People’s Democratic Party, won in Ankara and Istanbul, albeit by a narrow margin.

Therefore, when Erdogan formed the new government this time, he appointed prominent ministers primarily from Kurdish backgrounds, such as Finance Minister Mehmet Simsek, Vice President Cevdet Yilmaz, Intelligence Chief Ibrahim Kalin, Health Minister Fahrettin Koca, and Central Bank President Hafiza Arkan, all of whom are of Kurdish origin.

Erdogan intends to benefit from them in their positions, and he wants to send a message to the Kurds that they represent the government and have a significant presence.

Hence, an important observation emerges that the ruling alliance aims to appeal to Kurdish voters in the upcoming local elections, thereby bolstering support for their candidates. President Erdogan, closely monitoring the local elections, intends to present a new package of promises and services to Turkish citizens. Furthermore, he seeks to capitalize on the noticeable shortcomings and decline in service quality under municipal administrations affiliated with the Republican People’s Party in Istanbul. In light of these favorable conditions, Erdogan could potentially reclaim these cities.

 

Regional Reconciliations

 

9. Don’t you see that Erdogan’s rapprochement with Gulf regimes, especially Saudi Arabia and the United Arab Emirates, will halt the war on the lira?

 

Abdulmuttalip Arpa: Undoubtedly, observers of the foreign policies pursued in the Gulf countries will see that Saudi Arabia has somewhat deviated from Western and American policies. Their distancing from the West is in favor of the East, represented by China and Russia through Turkiye, with whom they have good relations.

The Gulf countries have the money, but they need protection and security, and they can rely on Turkiye as a mediator to approach Eastern countries and provide the required protection.

Turkiye has relationships and offers what it can to these countries. We have seen that Saudi Arabia deposited $5 billion in the Turkish central bank, and the UAE also deposited $10 billion, as did Qatar.

Turkey is poised to witness a surge of economic investments from Gulf nations in the foreseeable future, accompanied by political and security convergence, signaling a mild shift away from the West.

It played a role in unifying the region’s countries and bringing Saudi Arabia and Iran closer, followed by economic and trade rapprochement among regional countries.

This will undoubtedly revive the Turkish economy, improve the situation of the Turkish lira, foreign investments, and stability.

 

10. How do you see Turkiye’s role in overcoming the Eastern Mediterranean gas crisis?

 

Abdulmuttalip Arpa: The extraction and establishment of Eastern Mediterranean gas resources necessitate the creation of extensive entities, networks, and alliances, surpassing the capabilities of any single nation-state.

Egypt, Israel, Greece, and the United States, standing behind them, have failed to create a gas pipeline to transport energy to Europe without Turkiye, at a cost exceeding $20 billion. In the end, Biden announced the withdrawal from this project due to the Libya–Turkiye agreement.

Everyone realizes that any gas pipeline across the Mediterranean to Europe cannot be achieved without Turkiye’s approval. This has spurred Israel, Egypt, and Greece to actively engage with Turkiye, recognizing the need for closer collaboration and cooperation.

Turkiye is present in Libya through an agreement with Egypt, which enables the launching of the gas pipeline to Europe through the Mediterranean, and with the longest coastline in the Mediterranean, the Turkish country will benefit from this.

Therefore, China wants to be openly present and participate in such projects in the region and establish closer ties with regional countries.