Monday May 28, 2018
By Selcan Hacaoglu and Onur Ant
The economic numbers say Turkey is booming. The financial markets seem to think it’s on the verge of a crash.
In
the streets and shops of Mersin, a large city on Turkey’s Mediterranean
coast, there’s little evidence of either extreme. Business-owners are
feeling the squeeze from double-digit inflation and a currency that’s
slumped 25 percent this year. But many say they’re inclined to stick
with the government of President Recep Tayyip Erdogan, who’s seeking
re-election in what may prove a knife-edge vote next month.
“Yes,
prices are higher and our profit margin is falling,” said Mehmet Kurt,
38, a kitchenware wholesaler. About a third of the items in his large
store come from China, and the rest are getting more expensive too
because their local producers use imported steel and plastics.
“But this is temporary,” said Kurt. “The government can’t
make things better, but it’s stopping them from getting worse. If we
change Erdogan, will whoever comes in do any better? That’s the
concern.”
Rate Surrender
With
an economic growth rate of 7.4 percent last year, Turkey has been
racing ahead of its peers. In recent weeks, investors have begun to
worry that the wheels could come off. All the fragilities of the Erdogan
economy came into focus. Bloomberg’s Chief Middle East Economist Ziad
Daoud expects economic growth to slow to 3.7 percent next year, while
inflation remains firmly above 10 percent, more than twice the central
bank’s 5 percent target.A widening trade deficit has to be
plugged with foreign cash. Turkish companies have racked up debts in
dollars and euros that are now much more expensive to repay. And the
president has fiercely opposed the higher interest rates that most
economists prescribe -- though he had to give way last week,
green-lighting an emergency hike to halt a run on the lira.
But
even if the economy is headed for trouble, the crunch probably won’t
come before Turks cast their ballots on June 24, according to Mert
Yildiz, founder of Istanbul-based economic consultancy Foresight.
Only
about 2 percent of the electorate is directly hit by market volatility,
Yildiz estimates. “For the opposition to defeat Erdogan, at least 8
percent of voters should swing sides,” he said. “There needs to be a
severe impact from financial markets to the real economy for that kind
of voter shift.”
Running Hot
Most polls
show the president far ahead of rivals but short of the 50 percent
needed for a first-round win -- opening the way for a risky runoff, in
which an “anyone-but-Erdogan” candidate would stand a chance.
Surveys
like the one by Ankara-based MAK this month rank the economy as the top
voter concern. Erdogan and his AK Party came to power after the
financial crisis and recession of 2001, which swept away Turkey’s
established parties, and they’re working hard to avoid a repeat.
With
the economy running hot, elections were brought forward by 18 months.
The government has enacted a series of stimulus programs, mostly aimed
at merchants and small-to-medium businesses, a key chunk of the party’s
base. State-guaranteed loans made it easier for entrepreneurs and
farmers to borrow.
Arguments over those policies are raging in
Mersin, a competitive constituency where all four main parties won seats
in the last election in 2015.
‘The People Know’
Abdullah
Baser, a 58-year-old AK Party official, points to a cap on gasoline and
diesel prices that cushioned the impact of the lira’s slide. “At the gas
pump it’s been bypassed, thanks to the government’s precautions,” he
said. “The people know this.”
Nedim Karakas doesn’t think such measures are enough.
“They’re
all save-the-day solutions,” said Karakas, whose tobacco and liquor
store is across the street from an AK Party branch office. “The problems
will come back.”
Karakas
says business is terrible: the Islamist-rooted AK Party has raised
taxes on alcohol, and the lira’s slump has made it impossible to renew
stocks of imported whisky. He’s sometimes tempted to shut up shop and
look for work, “but there are no factories in Mersin to work in.”
Karakas said he’s always voted for Erdogan, but is undecided this time.
“On the economy, the government is doing something wrong.”
‘Cases of Fear’
The
AK Party’s line on the lira is that foreign manipulation has caused its
decline. That argument resonates with voters, pollster MAK said in a
summary of its recent survey.
One reason is Turkey’s
government-dominated media, which means that “all the information about
the economy is channeled through a filter,” said Ozgehan Senyuva, an
associate professor at the Middle East Technical University in Ankara.
There’s another factor that may count in Erdogan’s favor.
The
crash of 2001 showed that Turkish voters deal out severe punishment for
economic mismanagement once its full impact is felt. But when a
collapse is something feared in the future, instead of a present
reality, they may prefer to stick with the rulers they know, according
to Senyuva.
“In cases of fear, people tend to repeat the last decision that worked,” he said. “You don’t take risks.”