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TÜSİAD YİK Chairman Özilhan: The increase in inflation is faster than in previous periods

TÜSİAD came together for the first High Advisory Council meeting of 2022.

In the High Advisory Council of the Turkish Industrialists’ and Businessmen’s Association (YIK), where harsh criticisms were made against the management of the economy, the focus of criticism was inflation, income inequality and interventions in the market. Addressing the opposition as well as the government, the TÜSİAD administration asked for a “concrete road map” from both the government and the opposition.

Tuncay Özilhan, Chairman of the High Advisory Council, who made the opening speech, said that right-wing populist movements in the world began to decline.

Expressing that the increase in inflation is faster than in previous periods, Özilhan said, “Inflation is getting out of control, the priority is to prevent and reduce it. Economic problems cannot be corrected with frequently changed regulations. On the contrary, frequent changes disrupt the economy.”

YİK Chairman Tuncay Özilhan said that the economy will be achieved by limiting the public deficit, encouraging savings, narrowing the current account deficit, reducing the pressure on TL, and lowering the country’s risk premium.

In summary, the headlines in Özilhan’s speech are as follows;

“We are waiting for a concrete roadmap”

An era in the world has come to an end. But what it replaces is not yet clear. The uncertainties arising from us and the uncertainties regarding the new world order are intertwined. We expect clear and concrete roadmaps for the new period from the government and the opposition. Our expectation is not to repeat old memorizations. To reveal how we can get out of the messy situation we are in. Everywhere we look, we see uncertainty, unpredictability and lack of confidence. We have now abandoned the safe harbors we know.

“Need new solutions”

Tensions between the USA-Europe and China-Russia axes are escalating. The last stop of this escalation was Russia’s invasion of Ukraine. We do not know how the Ukrainian war will end, but we know that it has already changed the global architecture. The post-Cold War order also broke down. Security balances in the world began to be re-established. Economic issues were once again subordinated to national security priorities. This process undermines the most fundamental features of globalization.

Right-wing populist leaders gained power in the USA, Europe and some emerging economies. The strengthening of the place of the China-Russia axis in the global system could cause this right-wing populist wave to be replaced by a more authoritarian model.

However, the right-wing populist leaders who were in power in these countries were unsurprisingly unable to meet the expectations of the voters, and this wave began to partially recede.

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If this process accelerates and the global authoritarianism trend ends, the codes of politics will also change in the new period.

Intervention intensified

We are going through a very different process in our country. Although we continue to call it the free market model, market interventions have intensified recently. Practices that don’t fit the model increase uncertainty; creates difficulties in foresight.

The problem of income inequality, which the market mechanism could not solve, was intertwined with problems such as the rise of the right-wing populist wave in the world, the influx of refugees, insufficient welfare growth, and the meltdown of the middle class. An upward trend in inflation will further deteriorate income inequality. A comprehensive and effective policy is needed to improve income distribution.

New agricultural policy is needed for food problem

It is impossible to determine economic policies without taking these into account. The first of these is the food crisis. In this process, the food crisis triggering social tensions will increase instability in the world. The increase in food prices also affects our country.

Turkey needs a new agricultural policy to prevent the rise in food prices and to realize its enormous potential in agriculture and food.

Inflation is the root of all problems

Since inflation is the root of all economic problems, many central banks apply tightening policies to prevent inflation. Today, since the economies of countries are intertwined, the increase in interest rates by the USA affects all other countries.

Turkey is entering its second century, these uncertainties in global architecture. under it is entering. The choices we will make in the areas I have listed above, such as the global power struggle, the fight against the climate crisis, digitalization, and the production structure will shape the coming period.

We must clarify our preferences in the face of trends such as the consolidation in the Western alliance, the dissolution of the right-wing populist wave, the loss of power in authoritarian regimes, and the shifting of supply chains to countries that share common values.

“Permanent decline”

The question of how to transition to a stable economy at this point where the depreciation of the Turkish lira and the level of inflation reached, the gap between interest rates and inflation awaits an answer.

The increase in inflation is too fast to be compared with previous inflationary periods. This process distorts the relative price structure.

Companies do not know how to price. Consumers also have a distorted perception of prices. Inflation erodes the purchasing power of the people. The share of wages in total income is declining.

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The top priority in the economy should be to prevent inflation from getting out of control and then to ensure a permanent decline.

Otherwise, Turkey’s entry into an inflationary spiral, as in the past, will cause the society to pay a very high price. Steps taken to alleviate problems for a while rather than solving them backfire.

Economic problems are not solved by frequently amended regulations.

On the contrary, frequently changed regulations and interventions in the functioning of the market narrow the horizon of decision making and further distort the economy.

It is necessary to listen to the suggestions of experts, technicians and academics for policies that will put the economy on a stable and sustainable track without giving this opportunity. Decisions not taken by social consensus do not produce the desired results.

Undoubtedly, a permanent decrease in inflation cannot be achieved with monetary policies alone without changing the production structure.

Price stability is achieved by a very good planning, by utilizing scarce resources in sectors that create employment and have a chance to export, by preventing waste, directing investments to projects that will increase productivity, limiting the public deficit, encouraging savings, narrowing the current account deficit, reducing the pressure on TL, and reducing the country’s risk premium. .

“We grow by getting poorer”

TÜSİAD President Orhan Turan also drew attention to the following points in summary: Policies that are designed with the logic of competitive exchange rates, high exports and current account surplus, but which do not adequately overlap with today’s development understanding and practice, do not produce the desired results in terms of development. Growth alone is not enough for development, in fact, you grow poorer.

Now, the era of gaining competitive advantage in exports with cheap TL and cheap labor has left its place to creating high added value with highly qualified workforce and technology.

While the world is undergoing such a drastic transformation, inflation, which we could not completely control in Turkey, is rapidly moving towards the three-digit threshold with the effect of inflationary pressure reminiscent of the 1970s in the world. While the whole world prefers to take the brakes by increasing interest rates in the fight against inflation, we have been following a monetary policy for a long time that not only causes the exchange rate to rise and accounts cannot be made, but also punishes savers. Therefore, taxpayers and the treasury have to carry an unnecessary burden.

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Compared to peer countries, we are the country with the highest inflation and extremely high risk premium in the world. As a matter of fact, we also saw the highest CDS level in 19 years this week.

“Unequal income damages the democratic system”

Incomes are melting rapidly under the conditions created by the economic policies followed. Especially those with fixed incomes feel the inflation pressure most deeply. The incomes of the urban, educated middle classes are also eroding. Let’s not forget that democracy weakens in a country whose middle class is not strong. The unequal distribution of income undermines the belief in the democratic system.

We believe that we will strengthen our position with rational and reformist steps and strengthening institutions in economic matters. By keeping up with the transformation in the global economy, we must enter a path where we will get a higher share from the world economy and increase our welfare.

The independence of the judiciary, the rule of law, loyalty to international commitments, freedom of thought and expression are not a luxury but a necessity for our society and economy. A severe erosion of the independence of the judiciary is the main cause of citizens’ distrust of justice. As we all know, justice is the foundation of property, that is, the state. That foundation has to be solid.

“Young people are worried”

Our young people want, above all, to be heard and taken into account. They believe that they are not understood and that they do not get enough support from their families and schools. He has deep concerns about the future. Their eyes are on other countries that they envy because of the freedoms and opportunities they have. They think that merit is not valuable, that advancement comes from having the right connections, not from working and putting in effort. Their trust in institutions is very low. They observe that there are many obstacles in front of women’s participation in social, economic and political life.

By the way, I would like to touch on the issue of gender equality. Before many developed countries of the world, we are a country where women had political rights and attained the status of equal citizens. Let me repeat once again that we think that the Istanbul Convention should be returned.

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