Saad Qamar Iqbal
Inflation and unemployment rocketing up, markets falling apart, Lira coming tumbling down – Turkish economy had once been all in the shatters. 2001 happened to be the breaking point for economy, erupting after the delinquencies and criminal mistakes which Turkish governments devotedly performed since 1980. Such were the crises.
Turkish economy in the previous-most decade though, is referred as a “miracle”, the “most-
fascinating growth story” by the HSBC Global Asset official and prominent Economists. This relatively recent drive is much related to the vow that calls to bring “Turkey in top 10 world economies”- by none other than the “controversial” current premiere of Turkey, Mr. Recep Tayyip Erdogan . It is in fact the current government set-up which has its due credit to not only pulling out of the sinking economy, but sailing it right through to let it be classified by its tripled GDP figure since the mega crises, booming investor confidence and the likes. On the European scene, it had the fastest growth of 8.5% in 2011. On the world scene, it is being regarded as the foremost emerging market, and is chasing up with China.
Very recently, stabilization on the economic scene is facing a scare. And again it is being dominated by politics of the region. The corruption accusation on the current government leaves unpromising impact on the macroeconomic well-being of the country. This recent turmoil, built by anti-government, “pro-secular” groups, arrived at its boiling point with the arrests of two cabinet ministers – over their purported role in the illegal estate deals.
Later on, these and other 6 ministers were sacked, further fueling up the controversies. The other dimension of the political trouble is the rivalry between self-exiled religious leader, Fetaullah Gülen and Recep Erdo?an- the former also being ally of the Prime Minister.
Pre-2001: What went wrong?
Turkey’s lure to comprehensively rely on the FDI or the short term capital inflows for the basic 
economic growth made the economics in Turkey very volatile throughout the 80s and the 90s. This lead to the rising rate of inflation- and it reached to the point when the average figure for 92-2002 period was 70.4%. The budget deficit financing was taken to staggering 7% of the GDP in 1997 and since most of it was chiefly financed by the short-term cash flows – greater harm was inflicted by the inflation. Ultimately, the comment “this is a serious crises” by Prime minister Ecevit climaxed the entire proceedings. The fear of bankruptcy further strengthened. The debt kept mounting up and so did the interest rates levied on them. The aftermath encompassed panicking financial markets; unstable exhange and interest rates. How else would it be possibly gloomier?
And who could have rescued the Turkish Economy after the legendary Bubble Burst?
Over 11 billion loan by IMF and other stabilization efforts prior to 2002 proved largely futile. The 2002 elections which led the Party of Justice and Development (AKP) to take the reins proved historically critical. Fortunately for Turkey, AKP not only began working on the well-implemented ways to recover, but also continued the good measures initiated by former financial Minister Kemal Dervi?.
IMF programs were made to prove more appropriate by making adjustments on the local scene. Their goal to undo the inequality in income distribution was pivotal- as only the elite and foreigners were actively soaking up all the wealth. Perhaps the most critical of the steps by Erdo?an was the introduction of FDI. As a consequence, investing was made less intricate, which attracted FDI back. This time attempts were made to make a positive use of such investment.
The goverment also had to impose certain controversial measures and privatising the public industries is termed as the bravest of them. The goverment was careful. It targetted only the loss-yieding companies. Switching to the floating exchange rate was another mega-move, and so was waving off limitations on the Central Bank. This was then extended to augment a series of banking reforms. Finally a much restricted fiscal policy helped disinflate the struggling economy; a once-written-off economy was gradually growing. And it did grow large; large enough to be termed as the 17th largest in world and sixth in the entire Europe.
Future Prospects: Is it in safe hands now?
“After a decade of steady growth, it is highly likely that the Turkish economy will experience a slowdown in 2014 and 2015”, says Atilla Koksal, the Chairman of Turkish Capital Markets 
Association. So is Turkey past its prime now? This anticipated slowdown could well be the result of political happenings dominated by three elections in two years. The results of first elections, where AKP secured distinctive majority, however made the uncertainty fade away to some extent. The cold war between the Gülen movement and Erdo?an, and international media’s disliking of the latter doesn’t help either.
Having said that, Atilla Koksal also stressed that Turkey offers an optimistic long-term investment case. Additionally, one could easily identify Turkish positive demographics as a major future potential. Half of its population is less than 30 in age.
The “Epilogue”
With strategic location, favorable climatic characteristics and positive demographics, Turkey has always had a great potential to be one of the leading economies of the world. However, the in-fighting, poor banking system, and the incompetent administrative control ceased Turkey to have a decent economic system- let alone play to its potential. The previous decade, however, changed the dimensions. The efficient, tightened control by the government certainly “cracked the shatters”. The freedom of Central Bank has paved the way for more circumspect strategies to take place. What happens in future is still a question to ponder upon.
The OECD (The Organisation for Economic Co-operation and Development) projects the economy to grow over 5% annually till 2017. Other independent associations expect lesser optimistic scenario – but a common perception suggests an ultimate rise after a couple of slowdown years. The elections could hold the key. And then they say if the confident and self-assured vow of Erdo?an about brining Turkey amongst top 10 leading economies is considered, one would be tempted to believe that this small step back might be an indication for the giant leap ahead. Such is the Turkish economic story.
The writer is studying Management Science at Istanbul ?ehir University. He takes interest in world economics and current affairs.
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