World Economy

Turkish Minister Rules Out Economic Crisis

Turkish Minister Rules Out Economic CrisisTurkish Minister Rules Out Economic Crisis

Turkish Economy Minister Nihat Zeybekci ruled out the possibility of an economic crisis in Turkey, saying his knowledge should be considered a guarantee against any concern.

During his speech at an official ceremony in the western province of Izmir on Friday, Zeybekci dismissed widespread criticism regarding the economic management of the country, saying: “Turkey is a powerful country. [They say] a crisis will emerge if this or that doesn’t happen. It doesn’t emerge, friends. For God’s sake [believe me]; I’m telling you,” Today’s Zaman reported.

The minister’s remarks came a day after the Turkish lira plummeted to its lowest level against the US dollar, losing as much as 8% of its value in one week alone. The ailing currency plunged to an all-time low early on Thursday when it touched three to the dollar after failed coalition talks and violent clashes between security forces and outlawed Kurdistan Workers’ Party insurgents, both of which unnerved investor confidence in the country.

Turkey is particularly vulnerable to foreign exchange fluctuations because it depends on cheap capital inflow to finance its gaping current account deficit and due to the huge amount of dollar-denominated debts owned by both the public and private sector.

Beleaguered by the weakening lira, Turkey’s total external debt has surged by $114 billion over the last month and by $259 billion since January. If Turkey’s economy grows by 3% this year–the best projection, as many expect a lower percentage–the economy will have shrunk from $800 billion in 2014 to $600 billion in 2015 if dollar/lira parity remains at around three at the year’s end. French bank Societe Generale analysts Phoenix Kalen and Roxana Hulea speculated on Wednesday that the currency could slump to 3.21 against the dollar in the coming months.

The minister’s remarks on Friday stirred reactions among social media users, with many saying that those who position their investments exactly opposite to what the minister suggests rake up huge profits.

In mid-January, the minister said: “[Concerns that] the foreign currency is rising, this or that. These all will pass. These cannot damage the economy.”

 FDI Falls

Foreign direct investment in Turkey reached $6.3 billion in the first half of the year, the Turkish Economy Ministry said in a statement, Hurriyet reported.

FDI decreased by 9.6% compared with the $7 billion invested in the same period last year, the statement said. The energy sector took in the largest amount of FDI at $1.27 billion, and manufacturing sector followed at just over $1 billion. About 40% of total FDI came from the EU.

Close to $1.7 billion, about 38%, was from Asia, up from $631 million in the same period last year. There were 141 new foreign-funded companies established in June 2015, making a total of 44,245 companies with international capital operating in Turkey.