source: http://www.economist.com/news/finance-and-economics/21639583-ailing-economy-has-staged-partial-recovery-thanks-cheap-oil-saved
Key Points:
The sharp rise in interest rates needed to keep the lira from plunging naturally took a toll on the economy. The wilting currency, meanwhile, contributed to rising inflation. A further blow came with the upsurge in violence in neighbouring Iraq and Syria. Turkish exports to Iraq, its second-largest market after Germany, tumbled by 40%. And Turkey’s fraught peace talks with its own Kurds nearly collapsed threatening, in turn, a resumption of a 30-year rebel insurgency. The economic stability that has been the hallmark of the past 12 years of AK party rule seemed at risk.
Then the oil price slumped. That immediately relieved the pressure on the current account and on inflation. Turkey’s huge energy imports had been costing 6% of GDP a year. Thanks largely to lower fuel costs, the current-account deficit is set to shrink to around 5 % of GDP this year. Largely for the same reason, inflation will fall to 6.8%. Most bankers say the economy will grow by around 3.5% this year; the government talks of more than 4%.
Indeed, with other big emerging markets such as Russia and Brazil beset by troubles of their own, investors are giving Turkey another look. “A large volume of funds has started to flow into Turkey,” boasts Mehmet Simsek, the finance minister. The wobbly Kurdish peace talks seem to have been salvaged. AK is likely to win parliamentary elections due in June. Ali Babacan, the respected economy minister, is expected to stay on in some capacity.
Education is another worry. Only 1% of Turkish students have advanced computer skills, compared with 33% of their Polish peers. High-tech gear makes up a measly 2% of manufacturing exports (see chart); R&D spending totals only 0.9% of GDP. Yet Turkey’s Islamist president, Recep Tayyip Erdogan, seems interested chiefly in spreading the faith and reviving Ottoman Turkish influence.
Key Points:
The sharp rise in interest rates needed to keep the lira from plunging naturally took a toll on the economy. The wilting currency, meanwhile, contributed to rising inflation. A further blow came with the upsurge in violence in neighbouring Iraq and Syria. Turkish exports to Iraq, its second-largest market after Germany, tumbled by 40%. And Turkey’s fraught peace talks with its own Kurds nearly collapsed threatening, in turn, a resumption of a 30-year rebel insurgency. The economic stability that has been the hallmark of the past 12 years of AK party rule seemed at risk.
Then the oil price slumped. That immediately relieved the pressure on the current account and on inflation. Turkey’s huge energy imports had been costing 6% of GDP a year. Thanks largely to lower fuel costs, the current-account deficit is set to shrink to around 5 % of GDP this year. Largely for the same reason, inflation will fall to 6.8%. Most bankers say the economy will grow by around 3.5% this year; the government talks of more than 4%.
Indeed, with other big emerging markets such as Russia and Brazil beset by troubles of their own, investors are giving Turkey another look. “A large volume of funds has started to flow into Turkey,” boasts Mehmet Simsek, the finance minister. The wobbly Kurdish peace talks seem to have been salvaged. AK is likely to win parliamentary elections due in June. Ali Babacan, the respected economy minister, is expected to stay on in some capacity.
Education is another worry. Only 1% of Turkish students have advanced computer skills, compared with 33% of their Polish peers. High-tech gear makes up a measly 2% of manufacturing exports (see chart); R&D spending totals only 0.9% of GDP. Yet Turkey’s Islamist president, Recep Tayyip Erdogan, seems interested chiefly in spreading the faith and reviving Ottoman Turkish influence.
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