Turkey’s economy is expected to have grown 3.9% year-over-year in 2013, and is forecast to rise 3.9% this year.
After contracting 4.8% in 2009 following the global financial crisis, real GDP surged 9.2% in 2010, before plunging in 2012.
Turkey’s economy has been stuck in a rut and the issues that have bogged down its economy have also plagued other emerging markets. Here’s a look at some of the big issues.
Turkey’s current account balance is nearly -8% of GDP and is one of the reasons the IMF has marked it as one of the most vulnerable economies with external and internal vulnerabilities.
Core inflation continues to stay high and jumped to 8.4% in February, from 7.6% the previous month. Deutsche Bank’s Robert Burgess expects it to peak at about 10% this year.
This is putting pressure on the Turkish lira making it more expensive to import goods. This chart shows the U.S. dollar has run up over 23% against the Turkish lira in the last year.
And experts worry that this will lead to lower growth. Turkey is on track to post a CAD of over 5% of GDP for its fifth consecutive year. In a Financial Times column, Morgan Stanley’s Ruchir Sharma writes that since 1960, 15 large economies “have run a current account deficit of this scale and duration,” since the 1960. “If Turkey follows this path, its annual GDP growth will slow by half in the next five years, to barely 3 per cent.”
What’s more, Turkey’s government has come under fire for corruption, and support for the ruling AK Party is crumbling. Another feature plaguing emerging markets are corrupt governments that have been blamed for the economic rout. Remember, a bunch of emerging markets face elections this year which means major reforms are unlikely leading up to them.
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