Turkey’s economy thrives in shaky environment
The economy in Turkey once again shows remarkable resilience after a tumultuous 2015 and despite pressure from outside political developments deeply affecting the country.
If it was not Turkey, it is probably hard to find a country outside of Europe that is a poster child for the benefits of a diversified economy. Turkey, with a GDP ranking 18th in the world according to the latest data, seems to master the headwinds as it faced in the recent past. Despite political volatility in parts of Turkey and its southern neighbours besieged by violent conflict, despite a drop in tourism and economic pressure from its former ally Russia, and despite an overall sputtering global economy, Turkey managed to navigate through all this quite well with downturns in the country’s currently challenged economic sectors being dynamically offset by growth in others.
Strong economic growth
Turkey’s economic growth was about 4 per cent in 2015, outpaced only by China and India within the G20 states, owing to strong private and public consumption, strong life signs in the manufacturing, construction and service sectors, and growing foreign direct investment, mainly from Arab countries.
Although swamped with Syrian refugees and troubled by a re-emerging conflict with domestic separatists, occasional bomb attacks and a sometimes abrasive style in domestic politics, Turkey’s economic pillars continue to stand strong amid the hardships. Residents continue to buy cars and household appliances, go shopping, dine out and purchase homes.
The country even managed to turn the plight of hosting some three million refugees into an advantage. Only a sixth of this number stays in refugee camps, the rest is obviously working, renting apartments, trading goods and consuming, while the European Union (EU) pays Ankara received €6 billion to take the refugees back from Europe. This deal has also revived Turkey’s nearly stalled EU accession process and upgraded the existing customs union, all of which gives positive signals to foreign investors to Turkey.
Adding to that, the low oil price saved Turkey’s budget €30 billion on energy bills last year and was a major factor in spurring private consumption. According to the World Bank, Turkey’s economy is destined to grow at 3.5 per cent in 2016, with export increasing at low rate due to continued external challenges, but still increasing. While geopolitical problems in the Middle East and unresolved tensions with Russia will continue weighing on Turkey, the slow but steady recovery in Europe will be beneficial in the mid-term, the World Bank said, additionally pointing at the stable consumer purchasing power in the country.
Always in search of trade opportunities
‘We see private consumption again as main driver of growth,’ the World Bank noted, adding that ‘the minimum wage increase will boost private consumption. Public spending is also expected to contribute to growth.’ The country’s proactive exporters, always on the lookout for new trade opportunities (for example, as of late, Turkey’s cherry growers were successful in exploring new markets in the Far East, cementing Turkey’s role as the world’s top cherry exporter), led to a good start in 2016, while the weak lira of course also played a role.
In March this year, as of latest figures by the Turkish Statistical Institute, Turkey’s foreign trade deficit fell sharply for the seventh month in a row to $4.9 billion from $6.2 billion in the same month last year, a decrease of 20.3 per cent.
The statisticians valued March exports at $12.8 billion, a 2.3 per cent increase, while imports decreased by 5.2 per cent to $17.7 billion. In particular, Turkey’s exports to the EU rose by a whopping 18.1 per cent to $6.3 billion in March alone. One economic driver is also foreign investment coming from Gulf Cooperation Council nations. Many Arab tourists experienced Turkey as a country with cultural similarities, with relatively close proximity to the Gulf, an otherwise appealing geographic location bordering the EU, as well as state-of the-art infrastructure, including one of the largest airlines in the world that flies to 200 international destinations and will soon fly from Istanbul’s new airport, which is currently under construction. The airport is designed to compete for the title of being the largest airport in the world with an envisaged capacity of 150-160 million passengers annually when completed. Arabs also perceive Turkey as a safer destination for property investments than most Middle East countries, picking up prime real estate particularly in Istanbul and along the northern Black Sea coast.