Turkey Economy Miracle 2000 is a success tale. The Turkish economy has been associated with success and well-implemented reforms in the decade since the AKP came to power. Economic growth has been both the foundation of the country’s socio-political stability and the ambitious AKP external agenda. However, the dangers connected with a number of unsolved problems are becoming even more obvious. Current account deficits are among the most prominent. Other areas are temporary external funding, incomplete reforms, and insufficient budgeting.
This puts Turkey at risk of over-investor reliance, particularly from the West. Ankara has thus become a rehabilitation for its image as a prosperous economic State with a stable socio-political system. Any alterations to this image would result in capital flights, as shown by portfolio outflows and a rise in the cost of foreign debt after the national demonstrations over Gezi Park’s planned closure last summer. Also, Turkey is susceptible to possible investor-friendly developments in developing economies.
1 – Turkey Economy Miracle Story:
The AKP is maintaining growth changes it won in the 2002 elections. They stabilized the political landscape of the nation and provided the appropriate circumstances for enacting reforms. The AKP administration started privatizing state-held companies. They made foreign direct investment unusual. It has also implemented a successful banking system reform, protecting it from the repercussions of the global financial crisis. Also, Turkey has implemented a flexible currency rate system, removed limitations on foreign capital inflows, strengthened budgetary discipline, enhanced central bank independence, and stabilized inflation. The Turkey Economy Miracle started due to these actions.
The Turkish economy also gets benefits from objective circumstances. It is notably due to the geographical position near the EU markets and the increasing population. It has not yet fully realized its economic potential (between 2001 and 2012, Turkey’s population grew by 10 million to 75 million people). Turkey also capitalized on the rising trend in other areas of the globe. Also, it launched accession negotiations with the EU that served as a catalyst and had a favorable impact on the foreign investors’ image of the nation.
2 – Development In Central Anatolia:
In the wake of the reforms, a new class of entrepreneurs developed in central Anatolia, offering an alternative to the industrial elite. It is usually centered in and around Istanbul. The owners of Central Turkey’s small and medium-sized enterprises (Ankara, Kayseri, Gaziantep) that support the AKP have become Turkey’s primary export engine to expand to the Middle East and North Africa. The so-called Anatolian tigers, over time, accumulated enough money to start competing with holdings headquartered in Istanbul. Also, it established an alternative economic elite in the nation, contributing to Turkey Economy Miracle.
3 – GDP Improvements:
The increase of the Turkish GDP, and perhaps more importantly, the growth of the population’s buying power, is enhancing. They combined with the general belief in the country’s continuing improvement of the country’s economy. They have all contributed to the popularity of the AKP and formed the basis of the ambitious foreign policy pursued by Ankara. The European Union and nations throughout the Middle East accepted Turkey’s political and economic model favorably. Also, it was to be used as a potential export product. Turkey’s economic prosperity is promoting Ankara to play an important role in the Middle East. Turkey Economy Miracle shows an enhancement in the GDP growth rate.
The last decade has been a period for Turkey’s economic growth. The country’s GDP expanded at an annual pace of 7.2 % between 2002 and 2007. Turkey also had a comparatively good performance during the global financial crisis. It was following a decline in GDP growth to only 0.6% in 2008 and a subsequent recession. It saw a 4.6% reduction in GDP. The economy bounced back sharply. It yielded 8.8% growth in 2010, and you can observe 9.2% growth in 2011.
The Turkey Economy Miracle was partially the consequence of a series of Economic Secretary Kemal Derviş changes in the wake of the economic crisis in 1999-2001. Also, it was partly via the IMF stabilization programs. From 2017 to 2020, GDP growth rate of Turkey were 7.5%, 3.0%, 0.9%, 1.8% respectively even with COVID-19 pandemic. In the second quarter of 2021, the economy of this country grew at 21.7% year on year. It is the greatest yearly growth rate since 1999.
4 – Energy Price Cuts:
Turkish energy consumption is projecting to increase over the next decade. Ankara strives to reduce the cost of future energy imports and expand its local energy resources. It is true that the country consumed 72 % of its energy from abroad in 2011. Turkey will build Two nuclear power stations. One of them is slated for completion in 2023. Also, you can see electricity and gas liberalization. Also, you can see the development of the Turkish gas infrastructure. It enhances the diversification of gas supplies and gas market establishment in Turkey; One of the reasons for Ankara’s collaboration with Iraqi Kurdistan has been the necessity for Turkey to supply cheap electricity along with a wide variety of security concerns. It contributes to the Turkey Economy Miracle success.
Turkey started to build a gas pipeline to Iraq’s Kurdistan Region. Government starts it with the aim of importing a total of 10 BCM of gas annually. It has rates that are considerably cheaper than the ones paid by the major Turkish gas suppliers: Russia and Iran. More energy efficiency and the modernization of existing power plants are also envisaging in the government’s energy policy. However, given the long-term nature of these policies, Turkish reliance on foreign capital is unlikely to be reduced in the near future. This implies, in turn, that Turkey is now vulnerable to the dangers of potentially rising energy costs.
5 – External Trade:
The increase in Turkish exports is adding Turkey Economy Miracle success. Also, the decrease in the country’s reliance on imported energy sources is two areas most likely to contribute to a reduction in the current account deficit. However, Turkey still has a significant issue with the large proportion of imported intermediates in export commodities. The IMF assessed this share 70 % before the financial crisis. Following the economic crisis, the connection became less apparent as low-processed products (food, construction materials) were sent to nations in the Middle East and North Africa.
In order to promote Turkish products abroad and to modernize the export structure, the government of the AKP has been aggressively pursued by raising the proportion of high-tech items in general exports. More than 200 people have been working as advisers for the AKP since it came to power. The government also supported exporters via reporting on particular markets. Also, it is giving help and money (up to $7,500) for business visits for new business connections. As with the energy sector, the efforts to restructure and boost Turkish exports are long-term in character. Likewise, they are fully connected to profound economic changes. This implies that it is doubtful that in the near future, they will have a major impact on Turkey’s current account deficit. Experts are an exclusive part of the Turkey Economy Miracle.
6 – Macroeconomic Stabilization Results:
Turkey’s economic development was improbable not because of the macroeconomic stability carried out between 2002 and 2007. Between 2001 and 2007, Turkey reduced its public-sector borrowing from about 12% of GDP to nearly 0% by 2007. In addition, between 2002 and 2007, Turkey had a central budget surplus of approximately 3%. It allowed Turkey to have an almost balanced central budget from 2006. From January to April 2021, the budget balance of Turkey’s central government experienced a surplus of 5.9 billion Turkish lira (772 million dollars).
The macroeconomic stability has also been supported by the country’s monetary side. The central bank chose to give the national priority to price stability. Also, we can see the decrease in the annual inflation rate from 54.2% in 2001 to about 8.8% in 2007. This monetary achievement was another part of Turkey’s economic stability from 2002 to 2007. The AKP government’s reforms focused on creating effective institutions responsible for economic regulation. It is evidenced by, among other things, the continued reliance on imports of intermediate goods by Turkish exports and the country’s structural deficit on its current balance of the account. However, a portion of Anatolia started to rise to a higher economic standard, contributing to Turkey Economy Miracle success. It is in accordance with the fast expansion of Turkey’s GDP in the first two decades.
