Analysis | Who Will Be Turkey’s Next Finance Minister? Doesn’t Matter

Investors shouldn’t make the same mistake. Nor should they put much stock in the president’s vague promise to appoint a team with “international credibility” to manage the nation’s finances. Until Erdogan explicitly abjures his absurd economic ideas — the ones that have helped turn Turkey from the darling of emerging-market investors to a basket case on a par with Venezuela and Argentina — any appointments he makes should be regarded as mere window dressing.   

Simsek should know: He’s played that role before. In 2015, with investors growing nervous over Erdogan’s unorthodox economic ideas, the former Wall Street banker was appointed as deputy prime minister in an attempt to reassure markets. Simsek had been credited for maintaining fiscal discipline as finance minister between 2009 and 2015. His previous experience as a banker at UBS in Wall Street and Merrill Lynch in London was expected to count for a great deal with foreign investors.

But his role in the new cabinet was ill-defined, and within months his responsibilities had been trimmed. Many of the main levers of the economy were at the hands of those who followed Erdogan’s peculiar precepts on monetary and fiscal policy — principally, his notion that lowering interest rates is the way to fight inflation. The markets had by then recognized that Simsek was a decoy, which ultimately made him superfluous. When the offices of prime minister and deputy prime minister were abolished in 2018, the president didn’t care to find Simsek a new role in government. But after having sat demurely in the window, perhaps out of loyalty to his political master, Simsek had lost some of his credibility as an independent thinker.   

That Erdogan is considering bringing him back is a sign he again sees Simsek as useful — but for what, exactly? The president remains committed to lowering interest rates, which he regards as “the mother and father of all evil.” While he has acknowledged that inflation, currently more than 40%, is causing pain to Turks, his prescription for that hasn’t changed. And many analysts fear he will take his reelection as an endorsement of his economic policies and an encouragement to keep flauting fiscal orthodoxy.

Nick Stadtmiller, head of product at Medley Global Advisors in New York, told Business News he expects “interest rates will likely stay low, inflation will stay high, sovereign credit spreads will widen, while the currency will probably only slide slowly thanks to intervention.”

So the return of Simsek to government will not, by itself, betoken real change. It will take much more to persuade the markets that he isn’t again being used to dress Erdogan’s window.

Analysts will look closely at other appointments — to the central bank, for instance — to judge Erdogan’s willingness to cede authority in the management of the economy. But even a new slate of managers with “international credibility” will not suffice: So long as their jobs are the gift of the presidency, the officials will be constrained by his whimsy and caprice.

The closest thing to a guarantee of independence would be an amendment of the constitution that loosens the president’s grip on the levers of the economy. But having vastly expanded his powers through a referendum in 2017, Erdogan has shown no inclination to give any up.

In the absence of such evidence, investors should put little stock in the identity of next finance minister as they size up Turkey’s prospects during Erdogan’s third decade at the helm.

More From Bloomberg Opinion:

• Erdogan Needs a Post-Election Pivot: Editorial

• For These Strongmen, It’s Not the Economy, Stupid: Pankaj Mishra

• Turkey’s Erdogan Poised for a Third Decade in Power: Bobby Ghosh

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Bobby Ghosh is a Bloomberg Opinion columnist covering foreign affairs. Previously, he was editor in chief at Hindustan Times, managing editor at Quartz and international editor at Time.

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