World Economy

Restoring Ailing Economy

Restoring Ailing Economy
Restoring Ailing Economy

Overhauling the Turkish economy that has been faring badly under Justice and Development Party (AK Party) rule will be high on the agenda of the new government, with experts highlighting the need to reinstate investor confidence that has withered away with the anti-democratic laws introduced by the AK Party.

According to recent macroeconomic indicators provided by the Turkish Statistics Institute (TurkStat), annual inflation edged 8 percent in June while unemployment rose to 11.2 percent in February, Today’s Zaman reported.

TurkStat also announced that per capita income in dollar terms fell by $236 in the first quarter of 2015. Total exports slipped to $10.8 billion for the month, while automotive exports receded by 27.4 percent, down to $1.48 billion in May, according to the Turkish Exporters Assembly.

Speaking to Sunday’s Zaman, Professor Seyfettin Gursel from Bahcesehir University’s Economics Department said the dismal state of the economy might deteriorate further after the US Fed raises interest rates, which will deprive emerging countries of portfolio investments from foreigners, which these countries direly need to finance their large current account deficits.

 Recession Fears

Suleyman Yasar, a lecturer at Istanbul University’s management department and former vice president of the Prime Ministry’s Privatization Administration said the economy has entered a recession, citing the $236 fall in per capita income as the reason.

According to Yasar, the recession is a consequence of the fall in industrial output, decrease in exports due to shrinking opportunities abroad and the drop in investments.

Yasar argues that in order to stimulate economy, confidence in the economy should be reinstated as investors have been scared away by the legal changes enacted by the AK Party, such as subordinating the judiciary to the government, authorizing Internet censorship without a court order and endowing the police with sweeping powers to ensure that people cannot organize protests freely.

According to Yasar, in order to increase exports, relations between neighboring countries in the Middle East such as Egypt, Libya and Syria who used to be Turkey’s major economic partners should be improved by abandoning the country’s hawkish foreign policy.

 Relations Downgraded

Relations with Egypt soured after a coup ousted President Mohammed Morsi, a key ally of the AK party government, from power in the summer of 2013. Poor relations with Egypt cost Turkey heavily, with Egypt refusing to extend its Ro-Ro ship agreement with Turkey in April as the agreement had allowed Turkish exporters to bypass the Suez Canal and keep the increase in transportation costs in exports to the Persian Gulf region at a reasonable level.

Libya has also downgraded relations with Turkey, citing Turkey’s support of a rival administration in Libya. Turkish construction projects worth $19 billion were cancelled by the Libyan government in February, another blow to Turkish entrepreneurs abroad.

Another issue was the lack of security in Syria and Iraq due to the occupation of a large part of the territories of those countries by the Islamic State. In 2014, exports to Iraq, Turkey’s second-largest export market, fell by 16 percent compared to the previous year.

Yasar also said the owner of small- and medium-sized enterprises as well as civil servants and workers who bore the greater brunt of the stagnant economy and inflation higher than wage increases should be exempted from paying taxes and social premiums.