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Turkey’s economy must embrace its remaining key anchors

Turkey’s economy must embrace its remaining key anchors

ANKARA: For sure, Turkey has been at a historic turning point. Following a fairly tough year, which was full of bomb attacks, a coup attempt and a series of state of emergencies, a key referendum was held on April 16. These have all had an impact on the economy as well. The country has no choice other than to strengthen the few anchors which are left in its hands to maintain the economy. Before proceeding into these economic details, let’s briefly turn our attention to the referendum results. Some 51.4 percent of the more than 58 million Turkish voters said “yes” to the charter amendment package, while the remaining 48.6 said “no.” A total of 13 big cities, including the largest three and accounting for more than 60 percent of Turkey’s GDP, said “no.” The referendum results and the planned executive presidential system seem to have been discussed a lot. The key point for Turkey will be to reach a solution without deepening polarization across the country.  What the country needs most is the rise of the voice of moderation in a transparent environment.

A turbulent geopolitical environment, ongoing uncertainties and continuing large external financial need have all negatively affected the Turkish economy. The non-fulfilment of the required structural reforms has deepened the problems. Back in the mid-2000s, it was a fact that the country had a number of key anchors to boost its economy. One of them was a robust EU accession agenda. To be sure, many things have changed both on the Turkish side and in the EU side. The European Union has its structural issues right now in the wake of a crucial Brexit process and the rise of ultra-right political movements in some of its members. In this environment, Turkey is not a priority for it, provided the migrant deal is excluded from this equation. Both sides have escalated tension between each other, which peaked ahead of Turkey’s referendum, rather than listening in a sound manner.

The reintroduction of the death penalty by Turkey will bring nothing but tensions. Likewise, suggesting that Turkey has been the one “that has been losing its secular character” will not bring anything good either. Yes, Turkey is the EU’s fifth largest partner in trade in goods, and the value of bilateral trade in goods has increased more than four-fold since 1996, now hitting 140 billion euros a year. There is also always more than trade, as two thirds of foreign direct investment in Turkey currently originates from the EU. Most importantly, the EU is a key anchor for the country to become more democratic. Or should we say “it was?” If both sides change their discourse toward each other as soon as possible, yes, we should unfortunately say this. Although the realization of some key reforms to improve Turkey’s judicial, tax and investment climate was said to be a priority for the government in the post-referendum period by the top economy administration, time will show whether that will be possible in another turbulent period. What is left in Turkey’s hands is the country’s fiscal discipline and a lower country debt. A strong banking sector can also be added.  What will be critical is if the Turkish government shows reluctance in taking the necessary step of withdrawing its fiscal stimulus, which has been propping up economic growth, to many sectors.