During an interview on the YouTube channel Ekonomim in the Ankara Conversations series, Türker Ateş, CHP Bolu Deputy, argued that due to the government’s interest rate policy, zombie companies would go bankrupt, leading to a significant increase in unemployment. Ateş also stated, “There will be those who struggle in the banking system as well.”
Türker Ateş, the Bolu Member of Parliament for the Republican People’s Party (CHP), stated that during the elections, many issues were swept under the rug and that these issues would resurface as pressing matters. Ateş expressed that the Central Bank’s interest rate decision did not yield the expected results and explained that any intervention in the economy leads to other problems. Prior to entering politics, Ateş served as the President of the Bolu Chamber of Commerce and Industry and as a Board Member of the Union of Chambers and Commodity Exchanges of Turkey (TOBB). He emphasized that the exchange rate issue has pushed exporters towards the domestic market, creating an inextricable situation for those facing difficulties in pricing.
The increase in the Central Bank’s policy rate to 15% will not have any reflection in the market. The policy rate was already at 8.5% and had no correlation with the realities of the market. The 15% policy rate is also inconsistent with the market realities. Interest rates in the market have already exceeded 40%. After the elections, all anti-interest rate rhetoric disappears. While the economy’s structural problems require urgent solutions, the Central Bank cannot pull a rabbit out of the hat. Indeed, the decision to increase the interest rate to 15% demonstrates this.
The government, putting aside all its past rhetoric, presents the interest rate hike as a panacea, but portraying interest rate hikes as a magical wand to solve every problem is highly misguided.
Increasing interest rates will bring about different problems. Zombie companies will go bankrupt one by one, and unemployment will reach even higher levels. Our banking system is not as healthy as it was 10 years ago. Even if they don’t go bankrupt, there will be banks in a difficult situation. Currently, it is said that banks hold around 550-600 billion lira of low-interest, long-term government bonds forcibly purchased by the government. In the event of a shock interest rate hike, these banks will inevitably face difficulties, and the government will transfer resources collected from the public to compensate for the banks’ losses. Ultimately, the bill will come back to the citizens.
The purchasing power of citizens is eroding every day in the face of inflation.
Citizens who cannot make ends meet are trying to survive by accumulating debt from banks. The credit card and consumer loan debts of citizens to the banking sector have increased by 579 billion lira (an increase of 36.8%) in the first six months of this year, reaching 2.2 trillion lira. Since the beginning of the year, consumer loans have increased by 292 billion lira, reaching 1.411 trillion lira, while credit card debts have grown by 287 billion lira, reaching 741 billion lira. With new price hikes and taxes, the burden of the government’s misguided economic policies will also fall on citizens who are already trapped in debt. We cannot say that we have a bright picture ahead of us.
The economy is like a runaway truck with its brakes blown out, moving forward without knowing where it’s headed.
On one hand, the current account deficit, and on the other hand, the budget deficit, have reached unsustainable levels. It has been over two weeks since the new cabinet was announced, yet there is still no visible economic management in place. While the Central Bank Governor has changed, the members of the Monetary Policy Committee who made the previous interest rate decisions remain in their positions. The economy is like a runaway truck with its brakes blown out, moving forward without knowing where it’s headed. It is unclear where the end of the tunnel will lead us.
Businesses are either unable to access credit or can only obtain it at very high interest rates due to current regulations. Commercial life is focused more on repaying credit debts than on making profits. The situation for small businesses is also far from encouraging, as they consider themselves fortunate if they can cover their costs.