Thursday , May 17, 2018 - 12:15 PM
(c) 2018, Bloomberg.
With just weeks left to elections, Turks are being showered with government largesse.
From a pair of $250 checks for 12 million retirees, to tax breaks, lower mortgage rates, debt forgiveness packages and more, President Recep Tayyip Erdogan’s government is rolling out all the stops as he seeks to guarantee a win on June 24. The spending comes against a backdrop of economic strain that for the first time looks likely to threaten his support.
About half of Turks say that Turkey’s biggest problem is the economy, up from about 12 percent a year ago, according to an April survey by MetroPoll Arastirma. The outlook is unlikely to get any better: only 16 percent think that the value of the lira, the most closely watched bellwether for the state of the economy, will gain against the dollar in the run-up to the vote, according to the same poll.
“Everything is getting more and more expensive by the day,” said 60-year-old retiree Mehmet Guler, who said his family’s feeling the strain of inflation rates that have been in double digits for more than nine months, a lack of jobs and the struggle to make ends meet. “The rich are getting richer as we’re forced to sit at home and brew tea all day.”
The government has defended the spending measures amid concerns they’ll make things worse. In a pamphlet emailed on May 11, Cevdet Yilmaz, deputy head of the ruling AK Party, said they’re designed to “share the benefits of growth with our people and improve distribution of wealth.”
Among the new laws are a wealth repatriation incentive and tax cuts passed by parliament. An amnesty for about 13 million irregular or illegally constructed buildings, a bi-annual cash bonus for pensioners as well as cuts to value-added tax for real estate, have also been introduced.
On top of all that, $43 billion in debt owed to the state by more than 15 million taxpayers, or about 20 percent of the population, will be restructured. And three state banks sliced their mortgage rates, followed by as many as four private banks, to less than 1 percent a month, a rate that barely compensates them for inflation. On Thursday, the government announced that it will reduce special consumption taxes on fuel products to compensate citizens for future increases in international oil prices or exchange rates.
Naci Agbal, the finance minister, said in Istanbul on May 11 that the expansion in state spending would be balanced and that the government will avoid tax adjustments that could impact inflation. A day earlier, Central Bank Governor Murat Cetinkaya met with officials from the Treasury as well as the banking and capital markets regulators before working on a cost analysis, according to a person familiar with the plans.
The generosity is facilitated by one of the lowest government debt ratios in the G20, at less than 30 percent of gross domestic product. Turkey’s budget deficit is expected to widen to about 2.3 percent of gross domestic product this year, well below the emerging-market average of 5 percent.
Whether it’ll return dividends for Erdogan on June 24 remains to be seen. The vote is one of the most consequential in modern Turkish history, as it’ll mark the end of almost a century of parliament-dominated rule and a switch to an empowered presidential system.
“I’m looking forward to the first bonus payment,” said 60-year-old retiree Nihat Cetin, who said he’ll use the money toward a laptop for his sons. “But my vote is not for sale.”
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