Econostrum | Economic News in the Mediterranean

Turkey emerges as Europe’s BRIC economy

Written by Guillaume Perrier, à ISTANBUL on Tuesday, October 16th 2012 à 10:15 | Read 1019 times

The crisis of 2008 and 2009 has already been forgotten in Turkey, where the economy has returned to pre-recession growth levels. The country’s rapid economic growth has made it hugely ambitious, and it is emerging as a fifth BRIC (Brazil, Russia, India and China) economy.

Turkey is very ambitious and has managed the post-crisis period well (photo DR)
Turkey is very ambitious and has managed the post-crisis period well (photo DR)
TURKEY. A quick look at the history books is enough to show that Turkey, the 16th-largest economy on the planet, has moved up in the world. Once a perennial customer of the International Monetary Fund (IMF), Ankara not only refused a new loan from the organisation two years ago but now wants a seat on its board of directors – a campaign supported by Dominique Strauss-Kahn.  

Having been severely affected by the global crisis, Turkey is now producing ‘China-like’ results. Growth was above 10% in the first two quarters of 2010, and it is expected to be around 7% for the year as a whole. These figures make Turkey the OECD country to have emerged most quickly and robustly from the global crisis. "People are beginning to talk about BRIC + T” (for Turkey), claims President Abdullah Gül, who is delighted to see his country become one of the major emerging markets.   
 “Our economy is in better shape than several members of the European Union,” said Egemen Bagis, Turkey’s chief negotiator with the EU, at the beginning of the month at the presentation of Brussels’ annual report on the progress of the Turkish membership candidacy.  

Lessons from the 2001 crisis


Being dependent on external markets, Turkey suffered a deep recession in 2009 (-4.7%). The fact that it has turned things around so spectacularly is not so much down to ambitious recovery plans as to having experienced its very own crisis a decade earlier. In 2000 and 2001, a failing banking system took the country to the brink of bankruptcy. 
“We learned lessons because we realised that allowing banks to indulge in ‘unnatural’ activities was a risk,” explains Pekin Baran, vice-chairman of the high advisory council of Tüsiad, the country’s biggest employers’ association. As a result, the cleaned-up Turkish banks were able to resist the latest financial crisis well.   
The government also learned things about budgetary discipline from the downturn at the beginning of the millennium. The debt/GDP ratio is now less than 50% and reassured Turks are consuming once again. 

Conquering new markets

The second major advantage for Turkey, whose economy has long looked to the West, is the conquering of new markets. “The Turks are thinking in the short and medium terms,” explains Raphaël Esposito, director of the French chamber of commerce in Turkey. “They are looking for markets with growth: Iraq, Iran and even Africa.” Entrepreneurs are the first to benefit from a foreign policy that is largely dictated by economic interests. Exports appear to have enormous growth potential.
However, there are still some weaknesses in the Turkish economy. Unemployment is still a big problem at more than 10%, especially youth unemployment, while household debt is becoming a concern. The underground economy still soaks up more than a third of business, while inflation, although curbed, remains a threat. In order to reach the level of economic development in European countries by 2030, as Turkey hopes to do, it must therefore pursue structural reforms to increase productivity. 

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