Real interest rates, which subtract inflation from central bank policy rates, have been negative for a remarkable 13 of the 22 years that Erdoğan has been in power, according to FT research. This helped spur growth, boost incomes and sustain a construction boom. It also laid the foundation for an economic crisis.
By late 2022, real rates had fallen to minus 75 per cent. By mid-2023, fuelled by high government spending following a devastating earthquake and pre-election fiscal splurge, the economy was overheating. Inflation was running at 60 per cent, the lira was in freefall and Turkey had a current account deficit equivalent to almost 6 per cent of GDP but had negative net reserves of about minus $60bn.
Here is more from John Paul Rathbone at the FT. I would want to know more about what actual net borrowing rates have been, all factors considered. Still, this is quite something, even if it is only an interest rate on paper, so to speak.
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