World Economy

Turkey Economy Shrinking

Turkey Economy ShrinkingTurkey Economy Shrinking

Economists forecast that the growth figure for the Turkish economy might be negative this year amid rapidly widening political chaos throughout the country and signs that the economy has begun to show weakness, a fact that has also been publicly recognized by Finance Minister Mehmet Simsek.

“The latest developments will most likely not affect the growth forecast positively, but I want to emphasize that while they may affect the economy and markets negatively, we will not allow terrorist organizations to carry out operations in Turkey,” Simsek said, Today’s Zaman reported.

The already depressed lira sunk to 2.78 to the US dollar on Thursday after a series of Turkish air strikes on outposts of the Kurdistan Workers’ Party terrorist organization in northern Iraq have coincided with attacks on Turkish military personnel inside the country by PKK militants.

 Growth Slow

Turkey’s forecasted growth is already less than 3% this year, slow in comparison to the rapid growth the country enjoyed in recent years. While growth hit 9% in 2010 and 2011, it plummeted to less than 3% last year, a figure that is likely to stay roughly the same by the end of 2015.

Suleyman Yasar, economist and former vice president of the Prime Ministry’s Privatization Administration, told Sunday’s Zaman that Simsek should have realized the worsening situation of the economy earlier and added that the consumer confidence index has steadily declined since May 2014.

According to the Turkish Statistics Institute, TurkStat, Turkey’s consumer confidence index fell 2.7%, to 64.66%, close to the lowest in more than six years.

Yasar went on to say that the economy might shrink 2% in 2015 due to several factors, including the exodus of foreign capital from Turkey, the decrease in the number of tourists visiting the country and the prospects of the continuation of a military campaign against the PKK and the radical terrorist group the Islamic State.

 $36b Exit

“The tourists who used to visit Turkey preferred Spain this year. In the first six months of this year, a total of $36 billion worth of foreign investment left the country. In June, the number of tourists visiting Turkey fell by 4.89%. The US Federal Reserve might decide to increase interest rates. Against this backdrop, Turkey’s economy will shrink in 2015,” Yasar said.

Noting that in a recent International Monetary Fund report, Turkey was cited as having the most fragile economy among emerging economies due the central bank’s insufficient foreign reserves to finance a large current account deficit and short term debt, Yasar argued that if the current situation in the economy continues, 2016 will also be lost.