World Economy

Turkey Turmoil in 2015

Turkey Turmoil in 2015Turkey Turmoil in 2015

Once the front-runner in the league of emerging markets, the Turkish economy finished 2015 with external pressures along with ever-growing internal woes, both of which have spooked foreign investors in the country.

Crackdowns on dissenting companies and pressure on businessmen perceived to be critical of the government became a common occurrence in 2015, with citizens’ property rights coming under continuous threat, Today’s Zaman reported.

In an already fragile atmosphere in which investors have preferred the recently recovered US economy to those of emerging markets, the seizure of companies for what many call political purposes has been regarded as Turkey shooting itself in the foot.

 Lira in Trouble

The Turkish lira had already been in trouble throughout the year, stemming from prolonged pre-election instability, an infamous row between President Recep Tayyip Erdogan and the central bank governor over monetary policy and expectations of an interest rate hike from the US Federal Reserve.

Starting the year at 2.29 to the dollar, the lira sustained a series of record lows, once dropping as low as 3.07 against the US dollar. As of the last day of 2015, the lira-dollar disparity hovered around 2.93, 25% lower than its level at the beginning of the year.

The weakening currency also resulted in a contraction in per capita GDP. Even though the GDP, in lira terms, increased by a sluggish 3.4% in the first nine months of the year compared to the end of 2014, it slid by 9.3% in dollar terms, which equals a decrease of $723 in per capita GDP in the same period. Hailed for its flashy growth rates and becoming a shining star among emerging markets, as of late, the Turkish economy is now struggling but not shrinking.

The unemployment rate stubbornly remained at two-digits. Rising by some 39,000 in 2015, the jobless population grew to 3.1 million. According to the Turkish Confederation of Employers’ Unions, however, the unemployment rate hit 18.1%, which accounts for 5.9 million jobless citizens.

 Exports Fall

Even though the currency sustained great losses in 2015, the export volume, which is supposed to increase with cheapening Turkish goods abroad, recorded a freefall during the year since nearly half of Turkish exports go to European countries. Turkish exports shrank by 8.6% year-on-year in the first nine months of 2015 to stand at $131.9 billion, far behind the government’s target of $201 billion.

Jolted by all this turmoil, foreign investors in the Turkish stock exchange, Borsa Istanbul, sold off $1.14 billion worth of stock in November, the highest amount since June 2013.

Foreign nationals made a net sale of $1.905 billion in the first 11 months of 2015 and sold off $5.9 billion worth of government bonds in the same period.

The inflation rate, which the government estimated to be 5% at the year-end, reached 8.1% in November.