Post-election foreign exchange rate scenarios in Türkiye

One of the important topics of discussion in recent days has been whether there will be a change in the monetary policy character of the People's Alliance after the election. The discussion has political as well as economic reasons. In fact, economic reasons are being used as a lever for political reasons, and vice versa. Moreover, even though the issue has been raised many times, an opinion cannot be formed. If you have been involved in these fruitless debates, let me try to make sense of the matter for you.

Essentially, Türkiye could have been in a much more advantageous position by looking at the global conjuncture, and this debate might not have even come up. However, it faced the fact that the earthquake had a destructive impact on its economy, and bank failures with a suggestive tinge of deliberate policy preferences at the global level followed. While many factors were working left and right, there is no harm in discussing policy choices in the medium term. Understanding the pros, cons, risks, and opportunities would be beneficial in taking necessary precautions to protect against capitalist opportunists in the choice of monetary policy.

However, the issues are not being thoroughly examined, and quality is not being considered. The discussion is getting stuck at one point; that the dollar exchange rate should be higher than today's level and the control power will soon be out of the hands of the economic administration...

First of all, we need to state the following: Even if Türkiye were to increase interest rates instead of reducing them, the exchange rate, albeit a bit slower with the dollarization effect, would have reached today's level; the expected foreign sources would not have come, and an unsolvable situation would have been encountered in managing exchange rate pressure; considering the global increase in commodity and energy prices, a larger current account deficit would probably have occurred; inflationary effects would have been strong again, but maybe there would not have been an inertia estimated to be as high as 20 points at the very beginning; businesses would not have been able to manage their debts in the increasingly rising interest environment, their profitability would not have supported themselves, there would have been business closures, and unemployment would have increased; especially with banks failing all over the world, things would have gone completely awry; financing of the current account deficit would not have been possible, and exchange rates, interest rates, and inflation combined with the earthquake would have hit Türkiye small businesses and "lower-middle income group."

Today, there are different conditions, good and bad. Although many negativities are being discussed, there are many positives as well.

In fact, let me say this: even the most pessimistic scenario does not take into account all the potential tensions of the earthquake, bank failures, war, polarization, and so on.

I think someone who could have previously predicted all the dynamics of today's environment would have thought that the Turkish economy would be devastated. But that's not what happened. The contribution of the policies implemented is very high in this regard...

So, Türkiye has some important advantages that are not talked about much, as well as some disadvantages that everyone knows. What needs to be done is to focus on increasing the advantages through these discussions. Because making radical changes with the desire to exchange existing advantages for other advantages can only lead Türkiye to a more disadvantaged situation. Those who advocate this uncalculated change theory, that is, the existing advantages...