Tur­key's trou­bles deal new blow to stum­bling econ­omy

The Pak Banker - - BUSINESS -

The end to a ceasefire with Kur­dish rebels and po­lit­i­cal un­cer­tainty af­ter in­con­clu­sive June elec­tions are com­pound­ing al­ready mount­ing prob­lems for Tur­key's stut­ter­ing econ­omy, an­a­lysts say.

The re­sump­tion of reg­u­lar at­tacks by Kur­dis­tan Work­ers' Party (PKK) rebels in the south­east of the coun­try as Turk­ish jets bomb their po­si­tions in north­ern Iraq has brought back mem­o­ries of the 1990s when the coun­try was of­ten in eco­nomic, po­lit­i­cal and se­curi- ty chaos. The de­te­ri­o­ra­tion of the se­cu­rity sit­u­a­tion is al­ready im­pact­ing Tur­key's tourism sec­tor, which has boomed in re­cent years to be­come one of the sources of the im­proved eco­nomic pros­per­ity un­der the rule of Pres­i­dent Re­cep Tayyip Er­do­gan.

Even more dis­turb­ing for in­vestors is the spec­tre of po­lit­i­cal un­cer­tainty, with the coun­try still with­out a gov­ern­ment af­ter in­con­clu­sive June 7 polls and snap elec­tions still a pos­si­ble sce­nario. "The re­sump­tion of vi­o­lence with the PKK and the chance of a new elec­tion -- which may not un­block the po­lit­i­cal sit­u­a­tion -- will with­out doubt have an im­pact on state ex­pen­di­ture and in­ter­est rates which will have to go up," and Inan Demir, chief economist at Fi­nans­bank in Is­tan­bul. The loom­ing risk of early elec­tions "weighs on the in­vest­ment cli­mate", he added.

Er­do­gan, prime min­is­ter from 2003-2014 and pres­i­dent from 2014, owes his pop­u­lar­ity to bring­ing a new eco­nomic pros­per­ity to mil­lions of or­di­nary Turks, many of them re­li­giously-con­ser­va­tive small busi­ness own­ers, who form the core of his sup­port. Many Turks credit Er­do­gan and the rul­ing Jus­tice and De­vel­op­ment Party (AKP) for res­cu­ing the coun­try from the mire of its 2000-2001 fi­nan­cial cri­sis.

Er­do­gan re­peat­edly boasts of pre­sid­ing over an eco­nomic mir­a­cle and is now pro­claim­ing a tar­get for Tur­key to be­come one of the world's top 10 economies by 2023, the 100th an­niver­sary of the foun­da­tion of the mod­ern state. But growth slowed to 2.4 per­cent last year while the Turk­ish lira suf­fered mas­sive de­pre­ci­a­tion and the Is­tan­bul stock mar­ket has lost 20 per­cent in value since the start of the year.

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