How to make sense of Ankara’s recent move to economic and monetary orthodoxy
In a nutshell
- Policy changes are rapidly improving many of Turkey’s economic indicators
- Erdogan faces declining support; economic stability may boost his standing
- Constitutional changes, improved governance could help him
A year has passed since Turkey’s government made an important shift in economic policy, followed by additional orthodox monetary steps, and the encouraging results may offer President Recep Tayyip Erdogan a path to retain the presidency for years to come. The question is whether he will ride on a wave of improving economic indicators thanks to modest, short-term policy modifications to seek long-term, constitutional changes that would allow him to remain in power beyond 2028.
In June 2023, after Turkey had suffered five years of extreme inflation, the loss of foreign investment and widening fiscal deficits, a newly appointed minister of treasury and finance set out on a course of textbook policy while the central bank kept raising interest rates. The move has yielded positive results. Given the government’s history, however, one question still looms large: Is this policy shift tactical or…
