Journal of International Relations, European, Economic and Social Studies
Although the Turkish Prime Minister, Recep Tayyip Erdogan, initially claimed that the “crisis will tangentially pass through the country without causing major damage”, economic growth came to a halt at the end of the third quarter of 2008. Unemployment climbed to eighteen percent, while the inflation rate rose to more than 10% in 2011 - from 5.5% in 2007. Aggregate demand declined while bankruptcies of small and medium sized enterprises increased; the Turkish currency depreciated by forty percent and the stock market took a nose dive. An economic downturn in the presence of a heavy current account deficit and high level foreign debt led Turkey to negotiate her twentieth stand-by agreement with the IMF. The Turkish banking system started to show some signs of vulnerability though proving, rather curiously, more resilient than expected. In order to attract foreign capital, Turkey consistently kept the rate of interest above world equilibrium levels, and hence was able to finance its large current account deficit. Higher interest rates were accompanied by an over-valued Turkish Lira. Turkish exports slowly increased and their competitiveness in the world markets became dependent on MNC’s domestic production. Although Turkish foreign trade from 2008 to 2009 increased by 30%, import dependency has also increased. The EU’s share reached 50.4% of the total trade.
Table 2: Trade Balance, Central Bank of Republic of Turkey (CBRT)
Turkey on the European doorstep
Published on Feb 16, 2012
A Publication based on the International Conference organised at the European Parliament/Brussels by Dr. ELENI THEOCHAROUS, Member of the Eu...