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A group demonstrators chant slogans together as they hold posters during the protest. The ongoing protests were sparked by the arrest of Istanbul Metropolitan Mayor Ekrem Imamoglu.
How Imamoglu’s arrest is deepening Turkey’s economic woes
Last week’s arrest of Istanbul Mayor Ekrem Imamoglu sparked the largest anti-government rallies in a decade and resulted in widespread arrests throughout Turkey. Nearly 1,900 people have been detained since the protests erupted eight days ago.
Imamoglu, President Recep Tayyip Erdogan’smain political rival, was imprisoned on Sunday while awaiting trial on corruption charges. He has been leading in some polls, and many believe his arrest was politically motivated to stop him from running against Erdogan in 2028.
“The protests are not shrinking,” a journalist on the ground in Istanbul told GZERO. “The method of protest is transforming.” He said that protesters have been holding public iftars (evening meals) to break their fasts together during Ramadan and that a large protest is being planned for Saturday. Government authorities deported a BBC reporter on Thursday for covering the protest, highlighting the dangers for the Fourth Estate in the bicontinental city.
Protesters are also calling for a boycott of Turkish businesses connected to pro-government news outlets they feel are failing to cover the demonstrations. The government has expressed fears the boycott could further dampen the economy.
Turkey had been moving toward stabilization after a long period of political instability, soaring inflation, and economic woes. But the current political turmoil has started to impact the markets, with mounting uncertainty prompting international investors to pull substantial amounts of capital from Turkey’s financial markets. Simultaneously, the Turkish lira is under pressure, falling 3% and forcing the central bank to sell significant reserves.
The government is trying to get the economic situation under control. Turkey’s capital markets authority imposed a ban on short selling and speculation on further price drops. At the same time, it relaxed rules on stock buybacks to prop up rapidly falling share prices. In response, the index rose by around 2% before reversing course, falling back to its lowest point since November. This could have severe consequences for the country, particularly since Turkish investors depend heavily on the stock market as a hedge against the high inflation rate, which stands at approximately 39% this month.
Hard Numbers: Turkish lira crashes, French kids stabbed, Senegal closes consulates, German subs made in India, Costa Rican croc gets (self) pregnant
23.16: On Wednesday, the Turkish lira plummeted 7% to a record low of 23.16 per US dollar. But oddly enough, that's good news for Turkey's economy, since letting the currency fall is a sign that newly reelected President Recep Tayyip Erdogan might abandon his unorthodox policies known as Erdonomics.
5: Five people — four of them children — were injured in a knife attack in a town in the French alps on Thursday. Expect the tragedy to have political ramifications because the assailant, who's already been arrested, is a Syrian refugee.
40: Senegal has temporarily shut down all its consulates abroad after more than 40 people attacked its diplomatic mission in Milan, Italy. The country has been thrown into violent political turmoil since last week, when opposition leader Ousmane Sonko was sentenced to two years in prison for "corrupting youth" just months before the presidential election.
5 billion: India and Germany are working on a 5 billion euro deal to co-produce six diesel submarines to be built in the South Asian nation. This would help the Indians boost local defense production and diversify their military imports away from Russia, by far New Delhi's top supplier.
99.9: A female crocodile in Costa Rica who spent 16 years alone in a zoo managed to ... get herself knocked up. The fully formed fetus was 99.9% genetically identical to its mother. This immaculate conception, known scientifically as "facultative parthenogenesis," has been documented in birds, lizards, snakes, and fish — but never before in crocs.The Graphic Truth: Erdonomics vs. Turkish economy
This week, Turkey’s annual inflation rate reached 83.45%, a 24-year high. And that's just the official number — independent experts believe the actual figure is more than 186%, which means prices have almost tripled.
Yet President Recep Tayyip Erdoğan doesn't seem to be bothered by sky-high inflation, insisting he has the magic formula for Turkey's economy to grow out of the problem: continue to defy economic orthodoxy by keeping interest rates low. Now they’re at 12%, but if you factor in inflation, the real rate is minus 68%, which means that cash is burning a hole in the wallets of Turkish banks.
Erdonomics is all about putting growth above stability. If Turkey makes it easier to borrow money to invest, do business, and create jobs, GDP will expand at a faster rate than prices are rising.
To be fair, Turkey's economy is indeed growing, to the tune of a robust 7.6% year-on-year in the second quarter of 2022. That’s 0.3 percentage points more than in the first three months of the year.
Is it growing enough? Nope, according to pretty much any economist not on the president's payroll. Erdoğan’s ultra-loose monetary policy, experts argue, is killing the economy.
Another big problem is that Erdonomics has made the local currency nosedive against the US dollar. The greenback is very strong this year, true, but Turks and foreign investors would rather save or spend dollars on imports and stock up on worthless liras. Turkey also has $182 billion worth of debt it needs to pay back by April 2023, putting even more pressure on the lira.
Still, Erdoğan won't let Erdonomics go because he has an election coming up. When Turks go to the polls next year, the president hopes that if the economy keeps growing and inflation somewhat tapers off, re-election is all but assured. But that's a big if — and a major gamble for Turkey's strongman leader.
(Also, here's a fun take on Erdonomics by ... Erdoğan himself.)This article comes to you from the Signal newsletter team of GZERO Media. Sign up today.