Economic Recession Threatens Turkey’s Long-Term Development

7 june 2019

In 2019, Turkey may show the worst growth rates among developing countries. This forecast was made by the Analytical Center experts in the May Bulletin on global economic trends.

The authors write that Turkey's economy increased by almost 2.4 times in the 21st century. This was due to proper economic reforms at the beginning of the century, successful industrialization, export orientation and investment attractiveness of the country. In 2001, Turkey faced the most serious economic crisis in the postwar period. The key reasons were insufficient control over the banking sector and high dependence of banks on government bonds.

According to the experts, the government saved most commercial banks from bankruptcy and stabilized the functioning of the system, laying the foundation for future economic growth. Turkey's economy grew rapidly until the recession of 2008–2009. According to the Bulletin, the inflow of foreign direct investment has not reached the pre-crisis minimum since then. Moreover, the Bulletin states that the lack of own savings and dependence on energy imports make the Turkish economy extremely vulnerable to exogenous shocks.

In 2018, the devaluation of the Turkish lira and the resulted escalation of prices and interest rate, led Turkey to economic recession for the first time in 10 years. Therefore, the experts predict a negative trend for the growth rate of the country's economy in 2019.

The authors of the Bulletin believe that the country needs growth drivers. These may be export growth and tourism development. Moreover, the favorable geographical position at the crossroads of Asia, Europe, and Africa allows Turkey to be an "energy corridor" between the main gas and oil producing countries. This strategic position is gradually becoming a tool for the growth of the geopolitical influence of Turkey on a regional and global scale.

For details, see the Bulletin "Turkey’s Economic Recession as a Threat to Country's Long-Term Development".

For other bulletins on the development of competition, follow this link.