How can the economy recover?

To understand how the economy can recover, one must first define the concept of a crisis. In simple terms, a crisis is understood as a state of great distress, turmoil, or upheaval. It manifests in various forms: economic crisis, fiscal crisis, financial crisis, political crisis, government crisis, moral crisis... In fact, our country has experienced all of these crises from time to time, and we continue to experience some of them.

An economic crisis occurs when events that emerge suddenly and unexpectedly in the economy produce consequences that severely shake the national economy from a macro perspective, and firms and individuals from a micro perspective. Due to these crises, national economies pay heavy prices and suffer great losses. Because of a crisis, many people lose their homes, jobs, and savings. Many people join the ranks of those living at the poverty line. A crisis is the transition of an economy from a balanced state to an unbalanced state, or from a stable state to an unstable state.

Then, one must ask the following question: How does an economy recover from a crisis or get back on track?

For a sustainable recovery and stability, the following must be done:

• Inflation must be fought for price stability,

• An independent and predictable monetary policy must be implemented,

• The Central Bank must remain committed to inflation targeting,

• Trust must be built with the market and society,

• The market and society must believe in policy consistency,

• The risk premium must be lowered,

• Financing costs must be reduced,

• Exchange rate stability must be ensured,

• Fiscal discipline and transparency must be established,

• Budget discipline must be maintained,

• The tax base must be broadened,

• Dependence on indirect taxes must be reduced,

• Development and growth focused on industry, production, and exports must be targeted,

• Investments in areas such as defense, software, biotechnology, and renewable energy must be made and incentivized for high value-added production,

• Product diversification in exports must be pursued,

• Energy dependence must be reduced,

• The current account deficit must be lowered,

• Legal security must be ensured and institutional reforms must be carried out,

• A predictable legal system must be established,

• Regulatory institutions must be freed from political pressure,

• Education reform must be carried out for qualified human resources and increased productivity.

The economy does not recover with a "single move," but through a combination of trust + stability + production + reform. Monetary and interest rate policies extinguish the fire, while structural reforms treat the disease and provide permanent recovery and stability. High value-added production, education reform, and human capital; reducing energy dependence and increasing the share of technology in exports will lift our country out of the middle-income trap.

Economic crises are a process that increases our country's debts from the largest economic unit to the smallest, triggers unemployment, and destabilizes production and prices. It is not possible for an economy to live with these diseases in the long term. Exiting a crisis is as much psychological as it is technical and structural. If there is no trust and predictability, no matter what measures are taken, stability cannot be achieved; the economy cannot recover. Trust and stable production must be our sine qua non.

Prof. Dr. Duran Bülbül