Why Turkey’s economy might cause a war


For the duration of a year, the economy in Turkey has been in a recession mainly due to Erdogan’s unorthodox monetary policies. Furthremore, the war in Ukraine has caused the value of the Lira to sink even further. This has forced Erdogan into a tight corner with seemingly no options. With inflation on the rise, anyone can guess what this economy might cause in the geopolitical landscape.

The story begins in late 2018, with the censorship of financial data and Erdogan’s interference with the central bank itself. This caused the value of the Lira to drop, and as Turkey is an import-based economy, this caused inflation levels to reach 20%.

Now as you might know there is one main way which you can do when you see a catastrophic level of inflation. One of them is raising interest rates however many countries forego this as raising interest can have a negative impact on the spending of the population. When done wrong this can slow economic growth and even cause a recession for the country involved. The 2 benefits of this are that it does reduce demands and protects the currency value. You can guess what Erdogan did, not only did he not raise the interest rates higher instead he LOWERED them. Any banker that disagreed with him was sacked which added to the plummeting Lira.

What happens next is entirely dependent on whether the logistical issues the world is facing ease up. If inflation continues to rise then it can have serious geopolitical consequences not only for Turkey but the rest of the world.

Turkey is a huge energy importer. It imports 99% of its natural gas and 93% of its petroleum. It also relies heavily on Russia with half of its all energy supplies coming from there. Over these past few months, Erdogan has been more and more worried about Turkey’s future in energy. This would lead to Turkey doing some controversial things on the world stage to secure Russian oil. To get that Turkey has to unfortunately maritime claims in the meditarrean sea. Where Turkey already has 2 disputes, one with Cyprus and one with Greece.

Essentially Turkey’s domestic economic crisis could become a geopolitical one. If it does then economics might become even more challenging for Turkey to manage.

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