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Erdogan picks ex-Amazon economist to head Turkey central bank

BI Desk || BusinessInsider

Published: 00:21, 4 February 2024  
Erdogan picks ex-Amazon economist to head Turkey central bank

Photo: Collected

President Recep Tayyip Erdogan on Friday picked a former senior economist at the US online retail giant Amazon as the new head of Turkey's central bank.

Fatih Karahan's appointment follows the resignation of Hafize Gaye Erkan after less than a year in office over a media scandal involving her family, reports BSS/AFP.

The reshuffle appears to keep in place Erdogan's newfound commitment to market economics following years of financial turmoil.

Erkan won major plaudits from Western investors for spearheading a rapid series of interest rate hikes that helped stabilise the slumping lira and tame Turkey's dire cost of living crisis.

But the 44-year-old came under withering attack on social media and in some opposition publications for allegedly allowing her father to make unauthorised personnel decisions at the bank.

Erkan reportedly also angered Erdogan by telling one major newspaper that she had to move in with her parents because inflation had made renting unaffordable.

The attacks on Turkey's first woman central bank governor alarmed investors and created uncertainty about Erdogan's long-term commitment to his team.

"A major reputation assassination campaign has recently been organised against me," Erkan said in a social media statement announcing her resignation.

Karahan started his career as an economist at the Federal Reserve Bank of New York in 2012.

His official biography states that he also lectured at Columbia University and New York University.

He joined Amazon in 2022 and was appointed as Erkan's deputy at the central bank last July.

- 'We will continue' -

Erdogan selected Erkan for one of Turkey's toughest assignments after winning a tough May re-election in which his main opponent focused on Turkey's economic ills.

She joined a team led by Finance Minister Mehmet Simsek and other market-friendly technocrats that Western analysts saw as Turkey's best bet at pulling itself back from the brink of economic doom.

Their reforms have helped Turkey start winning back foreign investments and save the country from a potential banking crisis.

Erkan resigned just a week after completing a historic series of interest rate hikes that have pushed the baseline rate from 8.5 percent to 45 percent.

The bank said last week that it intends to keep rates high for the immediate future to make sure inflation is brought under control.

Simsek called Erkan's decision "completely personal" and in no way reflective of Turkey's future economic policies.

"Our economic programme, carried out under the leadership of our President Recep Tayyip Erdogan, continues decisively and without interruption," he said in a statement.

"We will continue to take firm steps towards our price stability target," Simsek said.

- 'Crisis over' -

Some analysts said Erkan's resignation could actually help Simsek and his team pursue their programme by removing a distracting scandal.

"I do not think that the resignation of the central bank governor will have a negative impact," Ankara's TOBB University of Economics and Technology professor Fatih Ozatay said.

"Moreover, this is a development that will take the pressure off the central bank."

Veteran emerging market analyst Timothy Ash called Karahan a "respected ex-NY Fed economist".

"Crisis over," Ash said in a social media statement. "The departure of Erkan has nothing to do with policy - just personal HR related."

Analysts view Erkan and Simsek's ability to convince Erdogan to perform an economic U-turn as one of Turkey's biggest success stories of recent years.

The central bank lost much of its independence during the second decade of Erdogan's rule.

The Turkish leader had parted ways with past central bankers who resisted his pressure to lower interest rates and achieve economic growth at all costs.

Karahan becomes Erdogan's sixth central bank governor since 2019.