Turkey’s outlook got worse on Monday as the country continues slipping into dictatorship, under a dictator who doesn’t seem to care much for laws or macroeconomics.
What’s happening: Turkey’s government ordered a do-over of mayoral elections in Istanbul, overturning a win for the opposition against loyalists to President Recep Tayyip Erdogan.
- The country’s lira currency fell to its lowest level since the currency crisis last year, when it was the weakest against the dollar it has ever been, on the news.
- Inflation is nearly 4 times the official target and the weakening currency will make it more expensive for Turkish companies to pay debt, much of which is in dollars and euros.
The big picture: The country is now in recession, having completely reversed an incredible economic expansion that had seen significant growth and plummeting unemployment. The country’s GDP had grown an average of nearly 7% each quarter since late 2009.
- “We’re in a political twilight zone, where the economy has fallen to the side,” Anthony Skinner, Middle East and North Africa director at risk analyst Verisk Maplecroft, told Bloomberg.
The bottom line: Things will get worse before they get better. Erdogan recently won re-election and has replaced his finance and economic ministers with his son-in-law, Berat Albayrak, who held a meeting investors in attendance called “an absolute shit show” and the worst they’d ever seen during the IMF-World Bank meetings in April.
- Erdogan and Albayrak’s plans to dig the country out of the economic malaise have been widely panned by investors and economists as unrealistic and overly optimistic. The duo have shown no sign of changing course.