{"id":9314,"title":"Inside Turkey\u2019s Economy","link":"https:\/\/bst-europe.eu\/de\/globalization\/inside-turkeys-economy\/","date":"10. August 2016","date_unix":1470838625,"date_modified_unix":1470838625,"date_iso":"2016-08-10T14:17:05+00:00","content":"
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Grand Bazaar Istanbul \/ LWYang @ flickr.com<\/figcaption><\/figure>\n

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Interested in even more expert insight into the Turkish economy? Come back soon for our exclusive interview with top Turkish economist Daron Acemoglu!<\/strong><\/em><\/p>\n

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On July 15, Turkey\u2019s tumultuous 2016 took a shocking twist as elements within the country\u2019s military attempted a coup against the government of President Recep Tayyip Erdogan. The putsch rapidly snapped at the seams, and a night that began with soldiers blocking bridges yielded a morning with those same soldiers flogged by civilians in the street.<\/p>\n

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In the days following the attempt, Erdogan declared a three-month state of emergency, and began purges of depth and breadth that extended well beyond public ministries and into the private sector. Thus far, analysts have primarily focused on the political and social implications, and for good reason. \u00a0Until recently, Turkey had been hailed as a model country in a neighborhood of profound instability. Now, many question the extent to which Erdogan will consolidate power, and what implications this could have for Turkish democracy and for broader regional geopolitics.<\/p>\n

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But in the coming months, Turkey\u2019s economic resilience could play an equally important factor in determining the outcome of the current upheaval. And, while Erdogan is now portrayed as a conservative strongman, his stewardship of the economy is critical to understanding his popularity. Should Turkey\u2019s economy falter, his domestic support could dissipate as well.<\/p>\n

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Despite Erdogan\u2019s influence in shaping Turkey\u2019s recent economic rise, the country faces specific challenges that are sure to complicate matters in the months ahead.<\/p>\n

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The Erdogan Economy <\/strong><\/p>\n

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To a degree, Erdogan\u2019s popularity stems from his efforts to create a space for religion in Turkey\u2019s public sphere. It is a popular \u2014and populist\u2014approach. Poorer Turks throughout broader Anatolia (as opposed to the more cosmopolitan western cities of Istanbul and Izmir) have historically been more religious and chafe at the perceived elitist secularism that has prevailed in country since the days of Kemal Ataturk, the founder of modern Turkey, and they have rallied around Erdogan\u2019s conservative populism.<\/p>\n

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But this is not Erdogan\u2019s only<\/em> appeal. He has also proved to be a steward of the Turkish economy, and this has won him significant support from small and mid-sized businessmen who recall the chaos of the late 1990s \u2013 characterized by violent swings in GDP and annual inflation that routinely topped 80 percent. Political and economic turmoil hit a crescendo in 2001, when capital flight sparked a banking and financial crisis. Over the course of that year, \u201cGDP contracted by 7.4 percent in real terms, wholesale price inflation soared to 61.6 percent, and the currency lost 51 percent of its value against the major foreign monies.\u201d[i]<\/a><\/p>\n

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Erdogan first assumed power in the wake of this meltdown. His Justice and Development Party (AKP) party won two-thirds of seats in parliament in 2002, and Erdogan himself became prime minister in 2003\u2014a year in which inflation still topped 25 percent. In subsequent years, he entrenched a stabilization effort (spearheaded earlier by former economy minister Kemal Dervis), implementing reforms consistent with International Monetary Fund and European Union (EU) recommendations that once again made Turkey an attractive destination for foreign direct investment. Inflation dropped to 8.5 percent in 2004, and it has hovered in that range since.<\/p>\n

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Improved macroeconomic conditions combined with a friendly disposition toward international business and investment created a favorable atmosphere for growth, which averaged 6.9 percent annually from 2003 to 2007. This was high-quality, sustainable growth, predicated on investment, multifactor productivity enhancements, and competition.[ii]<\/a> In particular, Turkey\u2019s \u201cAnatolian Tigers\u201d\u2014industrial firms from conservative heartland cities like Konya and Kayseri\u2014emerged as globally competitive forces. All told, Turkish exports increased from US$ 22.47 billion in 2000 to US$ 106.93 billion in 2014.[iii]<\/a><\/p>\n

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\"Turkey<\/a><\/p>\n

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Although the Turkish economy continued to grow after an initial dip during the global financial crisis of 2008-09, the quality of this growth has not matched that of the initial Erdogan years. Rather than reaping the benefits of productivity gains, increased consumption and credit has buttressed recent growth, including government-led construction projects that exacerbate budget deficits, benefit firms with ties to the government, and may not even be necessary in the first place.[iv]<\/a> The shift has somewhat muted the Anatolian Tigers\u2019 roar: From 2003 to 2008, exports to the EU increased over 300 percent. Since then, they have increased just 7 percent,[v]<\/a> though the EU\u2019s own economic slump certainly plays a role in this deceleration as well.<\/p>\n

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Erdogan would do well to return to his initial economic approach, but challenges on the horizon may make this difficult.<\/p>\n

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Frontier Challenges: Short-, Mid- and Long-Term Threats to Turkey\u2019s Rise <\/strong><\/p>\n

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