Economic risks on Turkish politics are on rise

On Feb. 12 President Tayyip Erdoğan was addressing his Justice and Ddevelopment Party (AKP) group in the Parliament. He was accusing Kemal Kılıçdaroğlu, the leader of the center-left opposition Republican People’s Party (CHP) of having secret links with the U.S.-resident Islamist preacher Fethullah Gülen who has been indicted to mastermind the 2016 military coup attempt. At some point, a voice was heard from the seats allocated to commoners. A man raised his hand and said he was fired from his job in relation with that coup attempt, couldn’t find a new one, his kids were suffering; he was asking for President’s help for a job. Before going back to slamming the opposition leader, after security people stopped the cry of the protestor Erdoğan did not say a word again with an uncomfortable expression on his face; he is clearly uncomfortable when the issue of unemployment, or cost of living is opened.
On Feb. 7 morning, Adem Yarıcı came in front of the governor’s office in Antakya, the center of Turkey’s Hatay province bordering Syria. He was holding a van of gasoline in his hand. “My kids are hungry” he was crying; “Don’t you understand? I need a job! Or I’ll burn myself”. Hatay Police Chief Vedat Yavuz was there waiting for the governor to come to the office. He tried to stop him but it was too late; Yarıcı set himself on fire with the lighter he was carrying. The policemen put off the fire and took him to the hospital. Yarıcı, who was looking for a job for more than a year and had gotten a divorce from his wife two weeks ago could not be saved. The coroner said he died of a heart attack.
A few hours later the same day, Turkish Treasury and Finance Minister Berat Albayrak, who is also the son-in-law of President Tayyip Erdoğan, was in the nearby province of Osmaniye, also bordering Syria. He was promising the local businesspeople that unemployment figures will drop sharply in 2020 as part of the success of the new economic plan that he has been conducting since July 2018.

Unemployment and poverty issues

Three days later, on Feb. 10, Turkey’s statistical institute (TUIK), which was linked to Albayrak’s ministry when he took the office, announced the unemployment rate towards the end of 2019 as 13.3 percent, with a one percent increase compared to the same period of the last year. That means from 2018 to 2019 more than 327 thousand more people have joined the massive army of the unemployed: more than 4 million 300 thousand people in the 83 million population.
The increase in youth unemployment, covering ages 15 to 24 was by 3 percent in the same period, hitting 25.3 percent. But according to workers’ unions, the actual figures are higher than that. For example, youth unemployment is 29.3 according to the leftwing DISK confederation’s research center and one in every four jobless people in Turkey is a university graduate, also shedding light on the systemic education problem in the country. According to Turkey’s biggest and most influential labor union Türk-İş, the poverty line for a family of four is 7229 Lira ($1208) and the starvation line is 2219 Lira ($370). The government has set the minimum wage for 2020 as 2324 Lira ($390).
I know numbers could be boring but, in this case, every percent is touching the lives of actual people. So, let’s continue.
Nearly 45 percent of the employees are on minimum wage and that is the number for registered workers only. According to the textile employers’ union’s (TTSIS) estimates, half of 2 million workers in the sector are unregistered, thus lacking social security. According to TUIK unregistered employment across sectors is 33.8 percent. Women’s unemployment, other than the agriculture sector, is 21 percent, officially.
Yet there is a sector in which employment is growing; that is the public sector. According to TUIK, employment in the public sector has reached more than 4 million 600 thousand people with a steep rise of 6.7 percent. The government employs more and more people, despite ongoing privatizations; reminding the bad old days of the Turkish economy, before the 2001 crisis and the 2002 reforms by Kemal Derviş.

Inflation, targets, elections

In 2019 the Turkish economy shrunk in three successive quarters (estimated 1.5 percent on a yearly basis) after many years of growth and a 0.9 percent growth in the last quarter. This has been presented by Minister Albayrak as a success not only in speeches he delivered locally but in the World Economic Forum in Davos as well. The 2020 budget suggests a 5 percent growth with IMF while World Bank estimates show a 3 percent growth, which may not be enough to recover.
The yearly inflation rate as announced by the Central Bank is 12.5 percent with a rise from last month’s yearly rate, which was 11.8. That’s in spite of Erdoğan’s and Albayrak’s belief that lowering the interest rates (by putting pressure on the Central Bank, public banks and private banks as well) would decrease the inflation rate. Erdoğan government’s 2020 budget suggests decreasing the inflation to 8.5 percent whereas the IMF estimates are 12.6 percent. But the government has given a 6 percent rise (on average) to public employees (in addition to retirement pensions).
Perhaps it is not enough evidence to show the actual inflation rate but some developments in the metal sector could give an idea about the situation. For example, in January, Türk-İş threatened the metal sector employers’ union (MESS) to go on a strike through a mass rally in Bursa, the heart of Turkey’s automotive industry, if the employers insist on an 8 percent pay rise for 2020. In the end, MESS agreed on an 18.5 percent rise for 130 thousand metalworkers. In the MESS decision, there might be two factors. The possibility of shifting automotive production away from China due to the coronavirus epidemic and the depreciation of the Turkish Lira, despite the widely reported government interference by pumping currency to the financial markets through the Central Bank and public banks.
The popularity of Erdoğan usually rises when there is a nationalist sentiment regarding military-involved operations in Syria and Libya, but almost all opinion polls show that those are temporary. The overall rating of Erdoğan’s AKP, together with Devlet Bahçeli’s Nationalist Movement Party (MHP) as its election partner, is below the 50 percent plus 1 vote election threshold to get re-elected. Under the ongoing economic circumstances, an early election for Erdoğan will be too risky and unnecessary.
And there is the possible effect of the U.S. economic and military sanctions due to Turkey’s purchase of Russian S-400 missiles, even though Erdoğan pretends that it is not an issue any longer due to his personal good relations with the U.S. President Donald Trump. The memories are fresh about the Turkish Lira’s depreciation by 30 percent in 2018 with only one Tweet by Trump. But perhaps Erdoğan relies on his counter-balance policy between the U.S. and Russia on Syria theater and hopes the impact of the sanction will be less than feared, due to possible bettering of relations with the U.S. against Russia. A risky game indeed, bur Erdoğan likes to takes risk, whatever will be the cost.