Serious Incentive and Systematic Production Policies Should Be Implemented in the Economy

According to the World Bank's latest Global Economic Prospects report, unanticipated factors such as the Russian invasion of Ukraine, combined with the negative effects of the pandemic (including the quarantines in China), have led to a global period of widespread and prolonged weak growth and high inflation. .

This situation aggravated the already existing slowdown in the global economy. As a result, it has become inevitable for the economies of low and middle-income countries to be affected by this negative situation and to encounter a fragile period. Nowadays, both inflation and stagflation risk go hand in hand in such countries.

As a result of the effects of the current unfavorable conditions, the global growth expectation was revised from 4.1% in January 2022 to 2.9% today. For 2023, the global growth is calculated as 2.2%. Therefore, all developing countries like Turkey are faced with weak growth prospects.

Moreover, the Ukraine War is not expected to end anytime soon, at least in 2022. The war in Ukraine has led to an increase in energy-related commodity prices. Higher energy prices lowered real incomes, increased production costs, tightened financial conditions and restricted macroeconomic policies, especially in energy-importing countries.

Indeed, the uncertainty that this war brought to the whole world hindered global trade and investment activities. Financial and monetary policies are no longer sufficient to stimulate declining demand. Therefore, it seems very difficult to see growth figures above 5% in 2023 and 2024. This means that the per capita income level in developing economies will continue to decline. Disruptions in the supply chain will affect everything like a chain reaction, triggering it negatively. The anticipated global recession will inevitably hit most countries.

The deterioration on a global scale resulted in the Turkish economy being more exposed to negative effects. Turkey; In December 2022, struggled with a rapid rise in foreign exchange rates. The doubling price of the currency, coupled with the global increases in oil and natural gas, forced the Turkish government to revisit its macroeconomic policies and seek solutions to calm down the markets.

The government launched the Currency Protected Deposit (KKM) application to protect the value of the currency. The interventions of the KKM and the Central Bank in the markets contributed to the financial stability in the markets for 3-4 months, but they were not enough. Thereupon, on 24 June, the BDDK increased the obligation for companies to exchange the excess foreign currency in their safes from 25% to 40% in return for obtaining the bank loans they needed.

As of July 1, the net minimum wage was increased from 4,253 TL to 5,500 TL in Turkiye. A mandatory improvement was made in employee salaries. Such improvements put the burden on companies a little more. For example, the cost of a minimum wage worker to the employer was 7 thousand 603 lira and 43 kurus. Salary increases, BDDK decisions, KKM applications, and the like new regulations had a negative impact on our medium and large-scale companies. It forced investors and exporters, and continues to do so.

In the meantime, the fact that companies were forced to exchange their foreign currency pushed especially large companies to "safeguard" their foreign currency abroad. For this reason, I would like to underline that the government should give priority to policies that encourage especially export-oriented companies to convert the foreign currency they earn into domestic investments.

Every mandatory step and regulation taken by the government to remedy the rise in foreign exchange and inflation causes collateral damage to Turkey's production and foreign trade dynamics under current conditions. Corporate dependence on the government's monetary policy has increased. In this foggy environment, companies should not be expected to foresee ahead, make investments, consolidate their export connections, and turn to new commercial accesses. The government must encourage production and avoid practices that restrict foreign trade.

It is imperative that the balance in the financial markets be established as soon as possible and that our companies can sell their goods abroad at competitive prices. That's why I see financial stability as a priority. In addition, the government should avoid policies that will increase the input costs for production as much as possible.

Despite the relatively increasing export figures in our country, the foreign trade deficit has entered an increasing trend. In my opinion, importing from abroad is still cheaper than producing domestically for the Turkish industry sector and exporters. It is necessary to establish a commercial environment where our export-oriented companies can assume wider responsibilities.

Turkish exporters are trying to increase the foreign exchange inflow to our country by selling the industrial products produced in the country to abroad within the framework of their foreign connections. On the other hand, Turkey has not yet made sufficient progress towards domestic production of high-tech goods. Although R&D and innovation activities in this direction and collaborations with multinational companies are considered important, such activities are not expected to be beneficial in overcoming the bottleneck in Turkey in the short term.

On the other hand, I also agree that this area is of key importance. Productions based on technology similar to Bayraktar TB-2 coincided with the needs of the countries around us (especially Ukraine and Azerbaijan), and we were able to achieve a significant export success in the defense industry. We must continue our journey to take our place in the world with 'brand' products like TB-2 with patience and wisdom.

At the same time, I think we can do other things in the short term. For this, we need to re-orient our production and export chain according to the rising needs in the world. Global warming, sanctions on Russia, the Russian blockade preventing the export of Ukrainian grain, large producers of agricultural products like China and India giving priority to their own needs, etc. Considering this, I predict that Africa will have difficulties in dealing with the problem of hunger and famine in the next 3-5 years. I foresee that Turkey, whose commercial and political access to African countries is increasing day by day, can become a producer and supplier of agricultural and livestock products that these countries need. Agriculture and animal husbandry are the fields with the lowest investment costs. In particular, if serious incentives and systematic production policies to be determined in this direction and are implemented, even our currently uncultivated lands will become arable, production abundance in agriculture will be experienced and a significant increase in the sales of agricultural products abroad will be achieved.