Turkey’s huge election expenses
2022.12.30 01:12
Turkey’s huge election expenses
Budrigannews.com – The latest measure taken by President Tayyip Erdogan to alleviate economic hardships ahead of tight elections is to allow more than 2 million Turkish workers to retire early. This will increase government spending to a record level.
The fiscal stimulus, which also covers things like gas prices and the minimum wage, is seen as being targeted at voters ahead of presidential and parliamentary elections, which will be Erdogan’s biggest political test in two decades in power.
According to polls, the president and his ruling AK Party have lost support in recent years as living costs have increased and the currency has fallen. The polls indicate that the vote in May or June is too close to call given that inflation has reached a 24-year high.
An overview of the economy, the budget, and the most important measures Ankara has taken thus far can be found here:
Despite Erdogan’s unconventional policy plan to cut interest rates to boost exports and spending, Turkey’s robust economic growth rate is expected to slow further toward the election.
The rate cuts caused the lira to crash one year ago and caused inflation to rise above 85 percent in October, leaving households struggling to pay for rent, food, and energy.
However, the lira has stabilized over the past few months, and Ankara anticipates a 24.9 percent increase in inflation by the end of 2023. At the time of the election, officials and economists anticipate 40 percent inflation.
Turkey’s public finances are robust in comparison to those of its peers in emerging markets, so there is ample room for stimulus. The 2023 financial plan incorporates 4.47 trillion lira ($239 billion) in spending and sees a shortfall of around 3.5% of Gross domestic product during the current year and next.
The record amount spent on social assistance makes up 1.4% of the budget. Subsidies for winter energy, assistance for students, wage increases for civil servants, an increase in the minimum wage, and debt write-offs will all be implemented in the first days of 2023.
A decrease in the cost of borrowing money from the government has reduced the price of the extensive pre-election spending. Ten-year yields dropped from a peak of 26% to the single digits as a result of a series of regulations requiring banks to accumulate more treasuries.
On Wednesday, Erdogan eliminated the age limit, granting immediate retirement to approximately 2.25 million people and implementing a measure that labor groups had long desired. It covers the people who began working before September 1999 and who finished 20-25 years of federal retirement aide enrolled working life.
The move could be inflationary, according to bankers who told Reuters that they do not anticipate all affected individuals retiring immediately.
In addition to the 40,000-50,000 people who retire each month in Turkey, Haluk Burumcekci, founder of Burumcekci Research & Consultancy, predicted that an additional 1.8 million people would retire as a result of the change.
He stated, “The burden of annual salary is likely to reach approximately 150-180 billion lira, while the burden of severance pay that will be carried by both the public and private sectors may exceed 300 billion lira.”
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Erdogan promised that the Treasury would implement a loan package backed by the state Credit Guarantee Fund to assist employers in covering the cost of severance pay.
According to Tera Yatirim, this would result in increased spending from the central government’s budget, which could increase inflation. However, the budget has performed better than anticipated, with a primary surplus of 1.0% and a headline deficit of just 1.2% of GDP as of November 2022.
The government increased the monthly minimum wage for 2023 by 100% from the previous year, bringing it up to 8,500 lira ($455).
Employers were more concerned about layoffs and higher costs as a result of the hike, which was intended to lessen the impact of inflation. The Turkish Clothing Manufacturers’ Association’s head, Ramazan Kaya, predicted that prices would rise and that fewer jobs would be created as a result.
According to Ismail Gulle, a current member of the Knitted Fabric Committee of the Istanbul Chamber of Industry and former head of the Turkish Exporters’ Association, the government will probably take measures to reduce job losses, such as offering a temporary working allowance.
According to a presentation made by the finance minister, spending on energy subsidies—particularly those for fuel and electricity—would reach 530 billion lira in 2023, up from 200 billion lira in 2021.
A total of 142.9 billion lira has been allocated for farm sector spending in 2023 on investment payments and support programs.
The budget for 2023 increased spending on social assistance to 258.4 billion lira. 650 billion lira will be spent on education, and 145.4 billion lira will be used to help the real economy.
