10 Key Insights into the Authoritarian Playbook for Economic Management in Türkiye
10 crucial takeaways on how Türkiye is managing its economy under growing authoritarianism.
What a day for Türkiye! (see details here) I’ve compiled 10 key observations on the economic dimensions of the authoritarian consolidation process in Türkiye.
1️⃣ A Larger Currency Shock Averted – Had London swap channels been open, the exchange rate shock would have been far more severe, forcing the Central Bank (TCMB) to spend even more of its already-depleting reserves.
2️⃣ A Win for Exporters – Exporters have long lobbied for a weaker lira, and now, partly as an unintended consequence of political decisions, they have secured some of the devaluation they sought.
3️⃣ Inflation Target at Risk – The likelihood of the TCMB revising its inflation target upwards is increasing, signaling further instability ahead.
4️⃣ All Eyes on Reserves – Market attention is once again fixated on the TCMB’s foreign exchange reserves, a critical pressure point for economic policy.
5️⃣ Corporate Debt Risks Mounting – The private sector’s rising foreign currency-denominated debt could trigger balance sheet crises, increasing financial fragility.
6️⃣ Higher FX Demand, Higher Interest Rate Pressures – With demand for foreign exchange growing, the TCMB will face intensified pressure to maintain high real interest rates.
7️⃣ Prolonged Tight Monetary Policy, Delayed Growth – Extending the high-interest-rate period may further postpone economic recovery, deepening stagnation risks.
8️⃣ Soft Capital Controls May Be on the Table – Measures akin to FX-protected TL deposits may re-emerge as the government seeks to contain foreign currency demand.
9️⃣ The Authoritarian Playbook for Economic Management – Contrary to mainstream assumptions, markets do not automatically steer countries toward democratization. Capital outflows—often seen as a punitive force against autocratic drift—can be mitigated through interventionist policies, keeping authoritarian regimes financially afloat.
🔟 Politics Trumps Economics – The economy alone will not divert Erdoğan’s government from its chosen path. Ultimately, it all comes down to politics.
As Türkiye’s economic and political trajectory continues to evolve, these trends underscore the growing entanglement of authoritarian governance and economic management.
Stay tuned for further insights on these critical developments.