News / Europe

Turkey's Economy Still Booming, But Challenges Remain

Turkey's Prime Minister Tayyip Erdogan in his office at the AK Party headquarters the day after his they scored a resounding third consecutive election victory, in Ankara, Turkey, June 13, 2011
Turkey's Prime Minister Tayyip Erdogan in his office at the AK Party headquarters the day after his they scored a resounding third consecutive election victory, in Ankara, Turkey, June 13, 2011
Dorian Jones

For the first time in its modern history, Turkey has resisted a serious global economic crisis, and also has decoupled itself from the rest of Europe by rebounding strongly in 2010. Although Turkey's economy is booming, however, the new government has some urgent matters to address.

When it first came into power in 2002, the Justice and Development Party, or AKP, faced a devastating financial crisis.

To prop up Turkey's economy, the International Monetary Fund supported an economic program for the country that it followed for nearly a decade, transforming Turkey into an economic tiger.  

Now, with the AKP once again at the helm, the priorities of the new government will be to implement policies to address the new economic challenges it faces.   

There are growing concerns that with the economy growing at 9 percent annually, there is a chance of it overheating, with inflation starting to rear its head. Also of concern is a skyrocketing deficit, running at nearly 8 percent of GDP [gross domestic product].

Emre Yigit is chief economist for the Istanbul-based trading house Global Securities. He said while the current deficit is not too threatening, it eventually could spin out of control.

"Turkey needs to borrow not less than probably $10 billion a month," said Yigit. "It's a testament to the strength of the Turkish economy and peoples' confidence in it, both at home and abroad, that this in fact has been going on more or less for years and nobody seems to be caring too much. But eventually chickens do come home to roost."

The global financial markets have been clamoring for the Turkish central bank to raise interest rates to dampen Turkish consumers' demand for imports. But the central bank fears that would result in a surge of new money being injected into the economy, driving up the value of the Turkish lira and resulting in even more imports being bought.

As a result, the government has been curtailing demand by increasing the amount of money that banks keep in their reserves, reducing the amount they can lend to consumers.  

This approach is making markets increasingly nervous, especially with what is going on in Greece.

Inan Demir, chief economist for Finance Bank, said time may be running out for Turkey.

"I am more inclined to give the Turkish central bank the benefit of the doubt," said Demir. "But given that global uncertainties are escalating once again, the international markets - with their bout of risk aversion that we are seeing right now if it turns into something more generalized - might just not be that patient."

The problems facing the Turkish economy also reveal fundamental structural problems that need to be addressed.

Cengiz Aktar, a political scientist at Bahcesehir University, said, "This is not sustainable. It will need cash from abroad. Turkey has a zero savings rate. It needs foreign direct investment. It needs to import in order to export. I am afraid this happiness chain may break unless there is no fundamental and macro decisions."

By Western standards, many parts of Turkey remain poor. Much of Anatolia, the rural eastern region, bears no resemblance to the glitter of Istanbul and the western coast. Still, Turkey's economic expansion has brought the prospect of a First World future closer than ever. The question is, for how long?

You May Like

Beloved Lion Killing Sparks Virtual, Real Life Outrage

Twitter, as usual, was epicenter for anger directed at Palmer, with some questioning his manhood, calling for him to be released into the wild More

Video Booming London Property Market a Haven for Dirty Money

Billions of dollars from proceeds of crime, especially from Russia, being laundered through London property market, according to anti-corruption activists More

Video Scouts' Decision on Gays Meets Acceptance in Founder's Hometown

One former Scout leader thinks organization will move past political, social debate, get back to its primary focus of turning boys into good citizens More

This forum has been closed.
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Booming London Property a ‘Haven for Dirty Money’i
July 29, 2015 9:34 PM
Billions of dollars of so-called ‘dirty money’ from the proceeds of crime - especially from Russia - are being laundered through the London property market, according to anti-corruption activists. As Henry Ridgwell reports from the British capital, the government has pledged to crack down on the practice.

Video Booming London Property a ‘Haven for Dirty Money’

Billions of dollars of so-called ‘dirty money’ from the proceeds of crime - especially from Russia - are being laundered through the London property market, according to anti-corruption activists. As Henry Ridgwell reports from the British capital, the government has pledged to crack down on the practice.

Video Hometown of Boy Scouts of America Founder reacts to Gay Leader Decision

Ottawa, Illinois, is the hometown of W.D. Boyce, who founded the Boy Scouts of America in 1910. In Ottawa, where Scouting remains an important part of the legacy of the community, the end of the organization's ban on openly gay adult leaders was seen as inevitable. VOA's Kane Farabaugh reports.

Video 'Metal Muscles' Flex a New Bionic Hand

Artificial limbs, including the most complex of them – the human hand – are getting more life-like and useful due to constant advances in tiny hydraulic, pneumatic and electric motors called actuators. But now, as VOA’s George Putic reports, scientists in Germany say the future of the prosthetic hand may lie not in motors but in wires that can ‘remember’ their shape.

Video Russia Accused of Abusing Interpol to Pursue Opponents

A British pro-democracy group has accused Russia of abusing the global law enforcement agency Interpol by requesting the arrest and extradition of political opponents. A new report by the group notes such requests can mean the accused are unable to travel and are often unable to open bank accounts. VOA's Henry Ridgwell reports.

Video 'Positive Atmosphere' Points Toward TPP Trade Deal in Hawaii

Talks on a major new trade agreement among 12 Pacific Rim nations are said to be nearing completion in Hawaii. Some trade experts say the "positive atmosphere" at the discussions could mean a deal is within reach, but there is still hard bargaining to be done over many issues and products, including U.S. drugs and Japanese rice. VOA's Jim Randle reports.

Video Genome Initiative Urgently Moves to Freeze DNA Before Species Go Extinct

Earth is in the midst of its sixth mass extinction. The last such event was caused by an asteroid 66 million years ago. It killed off the dinosaurs and practically everything else. So scientists are in a race against time to classify the estimated 11 million species alive today. So far only 2 million are described by science, and researchers are worried many will disappear before they even have a name. VOA’s Rosanne Skirble reports.

Video Scientists: One-Dose Malaria Cure is Possible

Scientists have long been trying to develop an effective protection and cure for malaria - one of the deadliest diseases that affects people in tropical areas, especially children. As the World Health Organization announces plans to begin clinical trials of a promising new vaccine, scientists in South Africa report that they too are at an important threshold. George Putic reports, they are testing a compound that could be a single-dose cure for malaria.

Video 'New York' Magazine Features 35 Cosby Accusers

The latest issue of 'New York' magazine features 35 women who say they were drugged and raped by film and television celebrity Bill Cosby. The women are aged from 44 to 80 and come from different walks of life and races. The magazine interviewed each of them separately, but Zlatica Hoke reports their stories are similar.

Video US Calls Fight Against Human Trafficking a Must Win

The United States is promising not to give up its fight against what Secretary of State John Kerry calls the “scourge” of modern slavery. Officials released the country’s annual human trafficking report Monday – a report that’s being met with some criticism. VOA’s National Security correspondent Jeff Seldin has more from the State Department.

Video Washington DC Underground Streetcar Station to Become Arts Venue

Abandoned more than 50 years ago, the underground streetcar station in Washington D.C.’s historic DuPont Circle district is about to be reborn. The plan calls for turning the spacious underground platforms - once meant to be a transportation hub, - into a unique space for art exhibitions, presentations, concerts and even a film set. Roman Mamonov has more from beneath the streets of the U.S. capital. Joy Wagner narrates his report.

Video Europe’s Twin Crises Collide in Greece as Migrant Numbers Soar

Greece has replaced Italy as the main gateway for migrants into Europe, with more than 100,000 arrivals in the first six months of 2015. Many want to move further into Europe and escape Greece’s economic crisis, but they face widespread dangers on the journey overland through the Balkans. VOA's Henry Ridgwell reports.

Video Stink Intensifies as Lebanon’s Trash Crisis Continues

After the closure of a major rubbish dump a week ago, the streets of Beirut are filling up with trash. Having failed to draw up a plan B, politicians are struggling to deal with the problem. John Owens has more for VOA from Beirut.

Video Paris Rolls Out Blueprint to Fight Climate Change

A U.N. climate conference in December aims to produce an ambitious agreement to fight heat-trapping greenhouse gases. But many local governments are not waiting, and have drafted their own climate action plans. That’s the case with Paris — which is getting special attention, since it’s hosting the climate summit. Lisa Bryant takes a look for VOA at the transformation of the French capital into an eco-city.

Video Racially Diverse Spider-Man Takes Center Stage

Whether it’s in a comic book or on the big screen, fans have always known the man behind the Spider-Man mask as Peter Parker. But that is changing, at least in the comic book world. Marvel Comics announced that a character called Miles Morales will replace Peter Parker as Spider-Man in a new comic book series. He is half Latino, half African American, and he is quite popular among comic book fans. Correspondent Elizabeth Lee reports from Los Angeles.

Video Historic Symbol Is Theme of Vibrant New Show

A new exhibit in Washington is paying tribute to the American flag with a wide and eclectic selection of artwork that uses the historic symbol as its central theme. VOA’s Julie Taboh was at the DC Chamber of Commerce for the show’s opening.

VOA Blogs