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BUSINESS & ECONOMY

Turkish Economy at Odds with the World

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4 years ago

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It seems that the economic fundamentals are breaking away from the very fabric of rationality ever since the pandemic upended the world last year. While the world is lumbering to tighten the monetary policy after awarding trillions to expand undeterred, there is a country operating on a completely different tangent. Growth is beginning to stagger around the world as the delta variant spews uncertainty yet it seems some defy the laws of economics – at least to an unobservant mind. And while inflation spares no country today, the policy in question to quench the damage somehow varies significantly. This fascinates me since globalization and subsequent economic interconnectivity have set each country on a trajectory that makes it surprisingly difficult to variate in decision-making – especially in terms of monetary policymaking.

I was recently taken aback when I came across a study regarding the economic health of Turkey. I was fortunate enough to have recently observed the European economy in detail (ECB’s Historic Shift in Inflation Targeting) to realize that Turkey defied the regional dynamics and continues on the path unapologetically. The Turkish economy grew by about 7% year-on-year in the first quarter of 2021. It was a healthy yet expected rebound as Turkey stood robust in the face of the pandemic last year – one of the few European economies – when it grew by 1.8% year-on-year. As covid restrictions eased in April, the Turkish economy boomed past expectations: expanding at a beleaguering rate of 21.8% year-on-year. Now take a moment and compare that to the plunge of 10.3% in the Turkish economy in the second quarter of 2020. Clearly, the economy rebounded spectacularly despite undergoing brief lockdowns in April and May.

Recently, Turkish President, Mr. Recep Tayyip Erdogan, cast his optimism in the performance of the Turkish economy: touting the annual growth to surpass the figures clocked in the first quarter. However, he substantially overlooked the growing threat of burgeoning inflation.

With an official inflation targeting of 5%, the Turkish economy is anything but close to containing the price increases. In fact, Turkey is on the verge of experiencing hyperinflation on the back of hiked commodity prices as the economy opens up. The Central Bank of the Republic of Turkey (CBRT) reported that inflation has bloomed to double digits, inching closer to 18.5% in July. It astonishes me that while the CBRT has hiked policy rates since last year – by as much as 10% – it has done next to nothing to contain the inflation responsibly. The CBRT policymakers have claimed that the surging inflation could be devoted to high consumer demand coupled with rising international commodity prices. However, while supply constraints are the clear culprit behind the raging inflationary pressures around the world, rising commodity prices could be attributed to another factor as well – specifically in the case of Turkey.

Another legitimate reason behind soaring domestic inflation and blooming dent in the Turkish exchequer relate to the massive depreciation in the Turkish Lira that has contributed to high import costs and in-affordability at the ground level. The devaluation of the Turkish Lira is one of the main reasons driving some of the sharpest price rises in the world. My analysis is concurred by the recent data released from the Turkish Statistical Institute revealing that while exports have climbed by 10.2%, imports have jumped by 16.8% compared to July 2020. However, the devaluation in Lira has broadened the Turkish trade deficit by 51.3% year-on-year in July, standing at $4.278 billion. It is apparent that despite a tight monetary policy and growing exports, the imports are driving inflation to nearly unstoppable levels – all while a plunging Lira is exacerbating the deficit.

Nonetheless, the CBRT has pledged to keep the policy rate at the highs of 19% – above nominal inflation rate – to subdue the raging prices and retain the purchasing power of the national savers and investors. However, President Erdogan seems persistent to campaign rate cuts later this month. Apparently, he feels that the economy needs more stimulation despite growing beyond expectations. While the central banks around the world are clambering to draw down dovish policies to curb inflation, Turkey seems to be pondering over a perverse strategy amidst catastrophic inflationary pressures. No doubt, it is a problematic situation. Over-the-top pressure from Mr. Erdogan to ease the policy later this month could drive inflation beyond the sinister 20% mark – as we observed that the consumption demand currently stands extremely strong. Therefore, while it seems enticing to prolong the growth regime and guarantee re-election in 2023, President Erdogan is simplistically overlooking the cons of searing inflation wreaking havoc over the emerging economy. Primarily, he is massively undermining the currency crisis that could worsen if inflation persists at such a high level. As a result, Turkey could turn into another Venezuela when the global economy rebounds while the inflation refuses to diffuse – even with conventional monetary policy tools.

I anticipate that when the CBRT convenes on 23rd September, the policymakers would be undertaking a crucial question: could Turkey afford interest rate cuts? Nevertheless, the economy is growing at a substantial pace. And despite inflation raging way past the conventional 5% mark, unemployment has contracted by an impressive 2.5% to stand at 10.6%. While I truly comprehend the urge to fuel the growth further, the economy is already overheated. For example, the Turkish economy is expected to further expand by 10% by the end of 2021 (unless intermittent lockdowns impede speedy recovery).

However, while the CBRT deems inflation as perfunctory – expecting inflation to dip down to 14% by the end of 2021 – economists expect the inflation to hold its ground and mist around the 18% mark by the fourth quarter. Thus, the real risk exists and would continue to haunt until the CBRT convenes later this month. I fear that if the policymakers truly end up downplaying the persistence of inflation and heed the pressure from President Erdogan to ultimately slash the policy rate, then the Turkish economy would be on the verge of another currency crisis – extending economic instability unlike ever before and long far into the future.

COURTESY: moderndiplomacy.eu/


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BUSINESS & ECONOMY

Yousef Khalawi Outlines Strategies to Shape the Future of the Global Halal Economy at MFH 25

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2 weeks ago

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March 4, 2025

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Hafiz M. Ahmed

In a talk at the Makkah Halal Forum 2025 , H.E. Mr. Yousef Khalawi , Secretary General of the Islamic Chamber of Commerce and Development (ICCD), shared his vision for shaping the future of the global halal economy. The session, titled “Strategies Shaping the Future of Halal,” was moderated by Dr. Wael Eldesouki Bedda , Secretary General of the Saleh Kamel Sustainable Entrepreneurship & Enterprise Development Organization (SKSEED), and provided attendees with a roadmap for driving innovation, sustainability, and inclusivity in the rapidly growing halal sector.

During the 20-minute interview, Mr. Khalawi emphasized the transformative potential of the halal industry,He outlined key strategies to position the halal economy as a force for ethical trade, environmental stewardship, and cross-border collaboration.

“The halal economy is not just about compliance—it’s about creating value that benefits humanity and the planet,” Mr. Khalawi stated. He highlighted the importance of aligning halal practices with the United Nations Sustainable Development Goals (SDGs), ensuring that growth in the sector contributes to poverty alleviation, gender equality, and climate action.

One of the central themes of the discussion was the role of technology in advancing the halal ecosystem. Mr. Khalawi praised the integration of blockchain, artificial intelligence (AI), and e-commerce as tools to enhance transparency, traceability, and consumer trust.

“Digital solutions are revolutionizing the halal supply chain,” he explained. “From farm to fork, blockchain ensures that products meet halal standards at every stage, while AI optimizes resource use and reduces waste.”

He also called for greater investment in halal tech startups, urging governments and private sectors to support innovation in areas like halal pharmaceuticals, logistics, and fintech.

Mr. Khalawi underscored the critical role of small and medium enterprises (SMEs) and women entrepreneurs in driving the halal economy forward. “SMEs are the backbone of the halal industry, and women are its untapped potential,” he said.

He highlighted initiatives led by the ICCD to provide training, funding, and market access to SMEs, particularly in underserved regions. Similarly, he praised programs empowering women entrepreneurs, noting that their leadership is essential to fostering inclusivity and innovation.

The interview also addressed the need for harmonized global standards to facilitate trade and build consumer confidence. Mr. Khalawi stressed the importance of partnerships between international organizations, governments, and private sectors to overcome barriers such as certification inconsistencies and trade restrictions.

“Unified standards are the foundation of trust,” he asserted. “By working together, we can create a seamless halal ecosystem that benefits producers and consumers alike.”

Mr. Khalawi commended Saudi Arabia’s leadership in advancing the halal agenda, aligning with the Kingdom’s Vision 2030 goals. He noted that Makkah’s unique position as the spiritual heart of the Islamic world makes it an ideal hub for fostering collaboration and innovation in the halal sector.

“Makkah is not just a host—it is a symbol of unity and ethical leadership,” he said. “This forum is a testament to the Kingdom’s commitment to shaping the halal future.”

Concluding the session, Mr. Khalawi issued a call to action for stakeholders across the halal ecosystem. “We must move beyond dialogue and take concrete steps to implement these strategies,” he urged.

Hafiz Maqsood Ahmed is the Editor-in-Chief of The Halal Times.

Courtesy: the Halal Times


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BUSINESS & ECONOMY

Can Trump Halt the BRICS De-Dollarization Effort?

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3 weeks ago

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February 23, 2025

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Timothy Hopper

Various efforts to reduce reliance on the US dollar in global trade are putting the future of this dominant currency under a spotlight. Donald Trump, the newly elected US president, has returned to the global economic stage with the same aggressive style and approach as before. This time, Trump has set his sights on the BRICS group, launching threats and criticisms from the outset. BRICS, composed of major economies such as Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran, Saudi Arabia, and the UAE, is currently discussing the creation of a common currency that could challenge the dollar’s long-standing dominance in global trade.

Trump has responded to these moves with harsh rhetoric, threatening 100% tariffs and the complete exclusion of BRICS members from US markets should they continue to push for de-dollarization. Yet Trump’s remarks have drawn renewed global attention to the question of the dollar’s future.

Reacting to BRICS discussions about creating a rival currency or supporting the adoption of an alternative to the dollar—which would likely spell the end of the dollar’s dominance in global trade, a position it has held since World War II—Trump stated: “We urge these countries to abandon the idea of creating a rival currency or agreeing on an alternative to the dollar. Otherwise, they will face 100% tariffs, completely losing access to America’s unrivaled economic markets.” Recently, Trump also threatened to impose a 25% tariff on all imports from Canada and Mexico, along with an additional 10% tax on goods made in China.

On the surface, Trump’s tactics might seem like they could strengthen the dollar’s position; however, a deeper analysis suggests they will backfire. Instead of deterring BRICS countries, they might actually spur their efforts forward, with China in particular taking the lead to accelerate the de-dollarization process. Long suspicious of Washington’s use of the US dollar as a geopolitical tool, China has spent the last decade slowly building up alternative financial systems, for example by increasingly using the yuan for international trade settlement and expanding Beijing’s direct influence through the Belt and Road Initiative. The Chinese government has also diversified its foreign reserves, reducing its reliance on the US dollar in favor of gold and other currencies.

From this perspective, Trump’s statements are not a deterrent for BRICS countries but rather a rallying cry for urgent action. His persistent use of tariffs and sanctions as tools of economic diplomacy has not only deepened divisions between the United States and rival nations but also fueled distrust among US trading partners. This approach will undoubtedly drive other nations to seek alternatives to the dollar. China and Russia, as key targets of US sanctions and trade wars, are at the forefront of these changes, having signed agreements for trade in local currencies and deepened cooperation under the BRICS framework.

While the creation of a BRICS common currency or adoption of a US dollar alternative remains entangled in logistical and temporal challenges, the initiative symbolizes the bloc’s collective determination to build a financial system that is less reliant on the United States. Trump’s repeated threats may disrupt these efforts in the short term, but they will inevitably validate the concerns underlying these initiatives: the fear that the United States wields its economic power with little regard for long-term global financial stability, and solely in pursuit of its own unilateral interests.

For China, locked in strategic competition with the United States, shaping a new and favorable global order extends beyond economics. These initiatives are part of Beijing’s broader ambitions to establish itself as a global superpower. A multipolar financial system would reduce China’s and other BRICS countries’ vulnerability to US economic pressures, granting them greater freedom to pursue strategic goals on regional and global scales. For example, China’s digital yuan project is part of this vision, potentially serving as an alternative to dollar-based international payment systems, particularly in emerging markets.

Ultimately, the dollar’s dominance has been built primarily on trust—a belief that the United States will act as a responsible leader in the global economy and that dollar-based assets will remain stable and accessible. However, by weaponizing the dollar through sanctions and tariffs, Trump risks undermining this trust, not just among adversaries but also among allies. As this trust wanes, the dollar’s status as the world’s reserve currency is also weakened.

The paradox of Trump’s aggressive posture toward de-dollarization is that by favoring tariffs and sanctions, Trump is accelerating the very trends he seeks to combat. If he fails to change course, the world may soon find itself more united against Washington.

Courtesy: Geopolitical Monitor


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BUSINESS & ECONOMY

Saudi Arabia’s Economic Power Showcased at the World Economic Forum 2025

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4 weeks ago

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February 16, 2025

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Aamer Yaqub

Saudi Arabia’s Economic Power will be on full display at the World Economic Forum (WEF) in Davos, Switzerland in 2025. This yearly confluence of global leaders from business, politics, and academia is poised to witness a commanding presence from the Kingdom. This robust participation underscores Saudi Arabia’s ascendant position on the world stage: a top 20 global economy, a dominant force within the energy sector, and a nation undergoing a profound and multifaceted economic transformation.

Diversification as the Bedrock of Economic Power

Investment Minister Khalid Al-Falih’s presence at the WEF is a powerful symbol of this paradigm shift. Saudi Arabia’s global identity has been almost exclusively intertwined with its vast hydrocarbon reserves for decades. However, the Kingdom is now proactively and strategically rewriting its narrative, placing economic diversification at the core of its future trajectory. This strategic redirection, meticulously articulated and implemented through the Vision 2030 plan, aims to forge a vibrant, sustainable, and diversified national economy.

This entails significantly reducing reliance on oil revenues and establishing Saudi Arabia as a leading player across a multitude of sectors on the global economic stage. This diversification is not merely a theoretical exercise or a public relations campaign; it is a concerted, well-funded, and meticulously planned national effort to build Saudi Arabia’s Economic Power on a robust foundation of innovation, technological advancement, and the cultivation of human capital.

The WEF provides an unparalleled platform for the Kingdom to share its unique insights, learn from global best practices, and, crucially, forge strategic partnerships that contribute to a more resilient, inclusive, and equitable global economic order. This encompasses collaborations on critical issues such as strengthening global supply chain resilience, fostering technological innovation and adoption, and collaboratively addressing pressing global challenges such as poverty, inequality, and climate change.

Building a Modern, Dynamic Kingdom

The WEF provides an optimal stage for Saudi Arabia to articulate and showcase the core pillars of Vision 2030. This ambitious national plan is far more than a simple collection of economic reforms; it represents a comprehensive societal transformation, impacting every facet of Saudi Arabian life. Here’s a more granular look at how the Kingdom is translating its vision into tangible progress:

  • Diversifying the Economy: Beyond Hydrocarbons: Vision 2030 unequivocally prioritizes the rapid development of non-oil sectors such as tourism, renewable energy generation, advanced technology, logistics and transportation infrastructure, world-class healthcare services, and a modernized education system. This multi-pronged strategy is designed to create millions of new job opportunities for Saudi citizens, foster a vibrant culture of innovation and entrepreneurship, and attract substantial foreign investment across diverse sectors.

  • Investing in the Future: Attracting Strategic Foreign Direct Investment (FDI): The Kingdom is actively and strategically working to attract substantial foreign direct investment (FDI) to provide the necessary fuel for its ambitious economic transformation. The National Investment Strategy plays a pivotal role in this crucial endeavor, offering a range of attractive incentives for foreign businesses, streamlining complex regulatory processes, and significantly improving the overall business environment within the Kingdom.

  • Untapped Potential: A Nation Ripe with Opportunities: Saudi Arabia possesses several key competitive advantages that it is effectively leveraging to attract investment, stimulate economic growth, and drive national development. These include a young and rapidly growing population, a highly strategic geographic location bridging Asia, Africa, and Europe, and a wealth of natural resources that extend far beyond oil, including significant reserves of minerals, abundant solar energy potential, and vast stretches of coastline suitable for tourism development.

Showcasing Progress and Future Potential

The strategically positioned “Saudi House” at the WEF serves as a central and highly visible hub for the Kingdom’s presence. This dedicated space provides a dynamic platform to:

  1. The Story of Transformation: The Saudi House will offer visitors an immersive and engaging experience, showcasing the Kingdom’s remarkable economic and social transformation through a combination of interactive exhibits, informative presentations, and high-level networking events.

  2. Tangible Achievements: The space will highlight Saudi Arabia’s tangible accomplishments across a diverse range of fields, including culture, innovation, tourism, and sustainability. This includes showcasing significant advancements in areas such as large-scale renewable energy projects, the preservation and promotion of Saudi Arabia’s rich cultural heritage, and the development of new and exciting tourist destinations designed to attract international visitors.

  3. Strategic Investment Opportunities: A core focus of the Saudi House will be to highlight attractive investment opportunities within the key sectors targeted for accelerated development under Vision 2030. This includes showcasing specific high-profile projects, clearly outlining available investment incentives, and facilitating direct and meaningful engagement with key Saudi government officials and influential business leaders.

Engaging with Global Leaders

Minister Al-Falih consistently emphasizes the crucial role of the WEF in facilitating high-level bilateral and multilateral meetings with major global investors. These strategic interactions are specifically designed to:

  • Specialized Expertise: The WEF provides a uniquely valuable platform for Saudi Arabia to connect directly with potential investors, showcase the significant progress it has made in enhancing the investment environment, and attract the necessary capital and specialized expertise to effectively support its ambitious economic diversification efforts. The Kingdom’s strategic position as the largest and most dynamic market in the Middle East and the Arab world further strengthens its inherent attractiveness to global businesses seeking new growth opportunities.

  • Global Best Practices: The forum provides an invaluable opportunity for Saudi Arabia to share its inspiring success stories in implementing far-reaching economic reforms, actively promoting entrepreneurship and innovation, and steadily developing a robust and sustainable knowledge-based economy. This crucial exchange of knowledge and global best practices not only benefits Saudi Arabia directly but also contributes meaningfully to the ongoing global conversation on sustainable economic development.

Addressing Critical Global Challenges

Saudi Arabia’s participation in the WEF extends far beyond transactional deal-making and investment pitches. The Kingdom is actively and constructively engaged in high-level discussions on a wide range of critical global issues, including climate change mitigation and adaptation, the complex global energy transition, and the collective pursuit of a truly sustainable future for all.

Vision 2030 places a strong and unwavering emphasis on environmental sustainability, and the WEF provides a crucial platform for Saudi Arabia to share its experiences, showcase its innovative initiatives in renewable energy and green technologies, and collaborate effectively with other nations on developing and implementing effective solutions for a more sustainable and environmentally responsible future.

While Saudi Arabia has made significant and demonstrable strides in implementing the core objectives of Vision 2030, the ongoing journey is not without its inherent challenges. These include:

  1. Developing a Skilled Workforce: Developing a domestic workforce equipped with the advanced skills and expertise required for the emerging new economy is a critical and ongoing challenge. The Kingdom is investing heavily in a range of targeted education and training programs to proactively address this crucial skills gap.

  2. Streamlining Bureaucratic Processes: Streamlining complex bureaucratic processes and further improving the overall ease of doing business within the Kingdom remains an important and ongoing priority for the Saudi government.

  3. Managing Global Economic Volatility: External factors beyond the Kingdom’s direct control, such as global economic slowdowns, geopolitical instability, and fluctuations in global commodity markets, can potentially impact Saudi Arabia’s economic growth trajectory.

  4. Managing Social and Cultural Shifts: Implementing significant social and cultural changes requires careful and sensitive management to ensure a smooth and inclusive transition that respects the Kingdom’s unique cultural heritage.

Despite these inherent challenges, the long-term opportunities for Saudi Arabia are immense. The Kingdom’s unwavering commitment to the strategic objectives of Vision 2030, its highly strategic geographic location at the crossroads of three continents, its vast and diverse natural resources, and its growing and increasingly active engagement with the global community position it for continued and sustainable economic growth and national development in the decades to come.

A New Era for Saudi Arabia

Saudi Arabia’s prominent presence at the WEF signifies a truly pivotal moment in the Kingdom’s modern history. It is a compelling narrative of ambitious economic transformation, deepened global collaboration, and an unwavering commitment to building a sustainable and prosperous future for its citizens and the wider world. The WEF serves not merely as a platform to attract foreign investment but also as a strategically important stage to articulate and share Saudi Arabia’s overarching vision, engage in constructive global dialogue on critical issues, and actively contribute to a more interconnected, equitable, and prosperous global community.

The Kingdom’s resolute focus on building Saudi Arabia’s Economic Power through strategic diversification, fostering a vibrant culture of innovation, and forging crucial strategic partnerships is effectively setting the stage for a new and transformative era of sustained economic growth, enhanced global influence, and enhanced national development on the world stage. The Kingdom’s dynamic and proactive participation in global forums like the WEF is a powerful testament to its clear ambition to emerge as a leading global economic powerhouse in the 21st century and beyond.

Deep Dive into Diversification

The cornerstone of Vision 2030 is undoubtedly the ambitious drive to diversify the Saudi economy away from its historical over-reliance on the hydrocarbon sector. This strategic shift is not simply about reducing dependence on a single commodity; it’s about building a more resilient, sustainable, and dynamic economy capable of generating long-term growth and prosperity for future generations. Several key sectors have been identified as crucial for this diversification effort:

  • Tourism: Saudi Arabia is investing heavily in developing its tourism sector, aiming to attract millions of international visitors each year. This includes developing luxury resorts along the Red Sea coast, promoting cultural heritage sites, and hosting major international events.

  • Renewable Energy: The Kingdom is making significant investments in renewable energy technologies, particularly solar and wind power. This not only helps to reduce its carbon footprint but also creates new economic opportunities in a rapidly growing global sector.

  • Technology and Innovation: Saudi Arabia is actively promoting the development of a vibrant technology and innovation ecosystem. This includes supporting startups, investing in research and development, and attracting leading technology companies to the Kingdom.

  • Logistics and Transportation: Given its strategic geographic location, Saudi Arabia is investing in developing its logistics and transportation infrastructure to become a major regional and global hub for trade and commerce.

  • Manufacturing: The Kingdom is also focusing on developing its manufacturing sector, aiming to produce a wider range of goods for both domestic consumption and export.

Investing in the Future Workforce

Recognizing that a skilled and adaptable workforce is essential for driving economic growth and innovation, Saudi Arabia is making significant investments in education and training programs. This includes:

  1. Improving the Quality of Education: The Kingdom is working to improve the quality of education at all levels, from primary school to university, with a focus on developing skills in science, technology, engineering, and mathematics (STEM).

  2. Providing Vocational Training: Saudi Arabia is also expanding vocational training programs to equip young people with the skills needed for jobs in high-growth sectors.

  3. Promoting Lifelong Learning: The Kingdom is encouraging lifelong learning and skills development to ensure that its workforce remains adaptable and competitive in a rapidly changing global economy.

Vision 2030 is not just about economic reforms; it also encompasses significant social and cultural changes aimed at creating a more open, inclusive, and vibrant society. These include:

  • Empowering Women: Saudi Arabia has made significant progress in empowering women in recent years, including increasing their participation in the workforce and granting them greater social freedoms.

  • Promoting Cultural Expression: The Kingdom is actively promoting cultural expression and creativity, supporting the development of a vibrant arts and entertainment scene.

  • Improving Quality of Life: Saudi Arabia is investing in improving the overall quality of life for its citizens, including developing new housing projects, improving healthcare services, and creating more recreational opportunities.

Saudi Arabia’s presence at the WEF 2025 is more than just a symbolic gesture; it represents a powerful statement of intent. The Kingdom is determined to play a leading role in shaping the global economy of the 21st century, leveraging its strategic location, its vast resources, and its ambitious vision to build a more prosperous and sustainable future for itself and the world. The journey of transformation is ongoing, but the progress achieved thus far is undeniable. Saudi Arabia is not just adapting to a changing world; it is actively shaping it, solidifying its position as a rising global economic power.

Courtesy: Halal Times


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