Cenk Sidar writes: For most of the past decade, Turkey’s economy has enjoyed remarkable success. Between 2002 and 2006, during the first term of the Justice and Development Party (AKP), growth averaged 7.2 percent per year, making Turkey a star performer in an otherwise difficult region.
While external factors played some role in Turkey’s success, one would be remiss not to give due credit to the ruling party. The positive steps the AKP took after winning power — continuing the IMF-led reforms initiated by its predecessors and maintaining a responsible fiscal and monetary policy — helped the country achieve the macroeconomic stability necessary to attract foreign capital.
This picture has changed significantly over the past few years, as Turkey has turned from an exemplary emerging market into a country that grabs headlines with stories of economic weakness and financial vulnerability. The current list of problems is daunting: rising inflation, slowing growth, foreign exchange pressure, rising fiscal expenditures, increased unemployment, overall debt, and loss of export competitiveness. The IMF expects Turkish GDP to grow only 3 percent in 2015 and 2016. The lira has lost over 10 percent of its value since the beginning of this year. Moreover, the country is falling behind rival emerging markets. In 2014, India and China left Turkey’s 2.9 percent growth rate in the dust with impressive rates of 7.5 and 7.4 percent respectively.
Turkey’s slowdown is mainly caused by longer-term structural factors, pointing to an urgent need for fundamental reform. And this is where the economic track record of President Recep Tayyip Erdogan and the ruling AKP has begun to suffer. Even as the Turkish economy sputters, the AKP government is focusing on unsustainable, and sometimes destructive, short-term measures, such as pressuring the central bank to maintain a loose monetary policy, jeopardizing its independence and legitimacy in the process. Meanwhile, the structural reforms needed to ensure the country’s longer-term development are being put off. Turkey’s Economic Problems
