International investors over the last couple of years had increasingly decided that Turkey was no longer a country to consider when looking for new opportunities. There were concerns over a slowing economy, and increasing dangerous neighborhood as well as the movement towards a more authoritarian type of government. Much of these anxieties have been exaggerated and as it turns out ill founded. Although Turkey has gone through a somewhat difficult period in some respects, the transition has recently been moving in a more positive direction.
Turkey remains a somewhat speedily developing country with the largest economy in Central and Eastern Europe. Turkey’s dynamic economy is a mix of modern commerce and industry along with a more conventional agricultural sector. Farming still accounts for 30% of employment, indicating that Turkey still has plenty of room to grow. Yearly GDP (Gross Domestic Product) has averaged 3.89% from 1999 to 2015.
Most importantly, although the state remains a major actor in banking, communications, transport and some major industries, the private sector is expanding rapidly.
The economy of Turkey has definitely turned around since the middle of last year. The Turkish economy had advanced in the 3rd business quarter of 2014 ending in September by 0.5%. This was in contrast to the 0.5% contraction in the preceding period of measurement. The expansion last fall was driven by construction, financial services, insurance, mining and transportation.
The last quarter of 2014 saw the rate of growth nearly double. At 0.8% the previous expansion was now extending into the agricultural sector, communications and information services, manufacturing and even in real estate.
Main Business District Of Ankara, The Capital Of Turkey
In the first quarter of 2015, the economy surged even higher with a growth rate of 1.3%. The average quarterly rate of growth for Turkey from 1998 to this year is 0.93%. The first three months of 2015, is the highest growth rate in a year and is being led by a rebound in exports. For three consecutive business quarters exports had narrowed, but 2015 saw a rebound of 3%.
Year on year the GDP is now increasing at an annual rate of 2.3%. This is slightly down from the previous projection, made at the end of 2014 of 2.6%. Some analysts are suggesting that Turkey’s economy will expand as much as 3.2% in 2015 and project a growth in GDP of 3.7%. However, considering economic growth rates elsewhere, it is clear that Turkey is moving in the right direction.
Skyscrapers Of Levent Business District In Istanbul, Turkey’s Largest City And Leading Economical Center.
Although it is true that Turkey exists in a volatile part of the world to the east and south of its borders, the country itself it in little danger of invasion. If for example ISIS (Islamic State of Iraq and Syria) would attack, they would at last meet the stubborn resistance that so far has evaded them.
Turkey is a member of NATO (North Atlantic Treaty Organization). Article 5 of the military pact states a military operation on one member nation, is an attack on all of them. This provision is likely to keep the country safe from any major incursion. The Turkish military itself, is strong enough to deal with provocateurs and operatives working on a smaller scale.
The Black Sea to the north provides a natural barrier from the danger of being drawn in to the conflict between Russia and the Ukraine on the other side of the sea. Georgia and Armenia to the east have little desire to encroach on Turkish territory. To the southeast is Iran, but the leadership there does not wish to end up in a confrontation with NATO. To the west is Greece and Europe. There is little to fear, even though there has been historical animosity between the Greeks and Turks that has lasted for centuries. In fact, Greece was once part of the Ottoman Empire which was run by the Turks. The Greeks only gained their independence at the beginning of the 19th century.
As far as security matters, Turkey has far more to fear from internal issues that an attack coming from abroad. Turkey has a population of nearly 78 million inhabitants. However, more than a quarter of the population is not Turkish. The Kurds concentrated in the southeast who make up some 18% of the total population, are a group that has historically clamored for statehood. They were even promised their own nation during World War I by the Western Allies. There has been an ongoing struggle by the Kurds to gain some recognition for their distinct culture and more self rule in their part of the country.
Part of the problem for Turkey
is there is a sizable population of Kurds in Syria, Iran and most especially the soon former country of Iraq. The Iraqis Kurds are for the most part independent from a central authority. The same can be said for the Syrian Kurds, as that country has collapsed into civil war. Only the Iranian Kurds are still firmly within the grasp of the host country. There is an ongoing fear among the leadership of Turkey, that the leaders of the various factions among the Kurds will one day soon unite and clamor for an independent state of Greater Kurdistan.
A further difficulty for Turkey is the huge influx of refugees from the conflicts to the south. As of 2015, Turkey has become the biggest refugee hosting country in the world. They have permitted 1.7 million Syrian refugees to cross their common border. At this point the international migrants that have arrived in Turkey, now make up 2.5% of the total population. This will undoubtedly create both economic and political problems for Turkey. As time goes on and it becomes increasingly doubtful that the refugees will be able to return home, a new accommodation will become necessary.
President Tayyip Erdoğan
In the recent elections held on June 07th, the ruling Justice and Development Party (AKP) suffered a major setback losing the majority in parliament it has maintained since 2002. Early results indicate that the AKP won just 256 sets in the 550 seat parliament. This is significantly less, than the previous 327 seats that were held before the election. AKP will now need to look for coalition partners to form a new government. It will not be easy given the large ideological and political differences between the various parties. It will mean compromise, something that will be good for the country in the long run.
Prime Minster Ahmet Davutoğlu
Most importantly, the election results are far below the 330 seats necessary to hold a referendum on constitutional change. The top priority of President Recep Tayyip Erdogan and the party he controls, was to move the present parliamentary system to a presidential one. This would permit him to consolidate his personal power through the office of the Presidency, even further. The voters wisely rejected this additional grab for power. The constitutional changes proposed by President Erdogan has now been put on hold, for at least until the next election cycle.
Turkey has the world’s 18th largest nominal GDP at $752 billion USD (United States Dollar). Per capita that is $9,680.00 USD. Turkey has the 17th largest global GDP at $1.569 trillion USD if calculated according to PPP (Purchasing Power Parity). Per capita that is $20,188 USD.
After becoming one of the first members of the Council of Europe in 1949, Turkey became an associate member of the EEC in 1963.
The country is among the G-20 major economies and is a founding member of the OECD (Organization for Economic Co-operation and Development). The European Union (EU) – Turkey Customs Union agreed to in a 1995 accord, led to an extensive easement of tariff rates. It remains one of the most important economic and foreign policy achievements of Turkey in recent years.
Negotiations for full membership within the EU itself began in 2005, but are unlikely to culminate with success any time soon. Partly it is the fault of the Europeans, who are not really interested in expansion at this time. Current EU members have their agenda full trying to modernize and assist the economies of more recent member entries from Eastern Europe. The ongoing debt crisis in Greece and escalating tensions with Russia over Ukraine, put the Turkish question on a back burner.
One Of The Top 100 Global Players In The Aerospace And Defense Sectors.
If the present Turkish government was serious about membership, it would have to change present policy towards the press. The rest of Europe would not tolerate the jailing of journalists, who are critical of the regime. Tax fines against newspapers that question his rule and the firing of columnists could not continue, if Turkey was part of the EU. Nor could the constant meddling in social media by trying to block access to websites and remove what the government considers offensive content. Indicting 105 people for insulting the present head of state, will not work in a Western style democracy.
Turkish Brands Like Beko And Vestel Are Among The Largest Producers Of Consumer Electronics And Home Appliances In Europe.
There is no doubt that Turkey faces economic and financial challenges. The near 3% in economic growth will not be sufficient in helping bring down unemployment, which averages near a ruinous 11% by some estimates. Labor participation is low and the participation of women in the workforce is dismal.
Another concern is how much of the present growth is being funded by short term borrowing and a rising current account deficit. Nearing 6% of GDP, the current account deficit is already the highest in the OECD. The Turkish lira has sunk in value by nearly 40% against the American dollar, in the last two years alone and inflation is running at an annual rate of 7.5%.
The economy of Turkey is still too dependent on construction and property, especially since much of the boom is being funded by the government. Many of the larger public sector projects are quite expensive and questionable, if one considers the the low rate of return in their construction to the economy at large.
Turkish Exports
Investors continue to be taken aback by the government’s campaign against the independence of the central bank in Turkey. President Erdogan in particular, continues to insist that interest rates are still too high. It makes creditors and credit rating agencies begin to reconsider present policies towards Turkey.
The long term economic success of Turkey will depend on the stability of the government and the strength of the private sector. Rated by the Heritage Foundation, Turkey comes in at 63.2 with the Index For Economic Freedom. A decline of 1.7 points from last year. There were declines in 5 of the 10 economic indicators. It makes the country the 70th freest in the world. It is still rated higher than the overall global average. The judiciary continues to be subject to government influence and charges of corruption have reached all the way into the upper echelons of government. While the economy remains open and contains a strong manufacturing base, inefficient regulations for business and labor as well as government interference, will continue to constrain higher rates of growth.