Turkey at the Crossroads: From Crisis Resolution to EU Accession

2010

Turkey is quite familiar with financial crises and recessions that follow and the recent 2008-09 crisis is the fifth in the last 30 years. Turkey had a foreign debt crisis in 1979, followed by a "stabilization and liberalization program" in January 1980. This program was based on a stand-by agreement with the IMF and countered the crisis with an extensive liberalization in finance and trade. Measures continued throughout the 1980s and culminated into capital account liberalization in August 1989. In early 1994, a post-liberalization financial crisis started, followed by another stabilization program that was supported with an IMF stand-by agreement in April 1994. The contagion effects of the Asian and particularly the Russian crises brought about a protracted crisis in Turkey in 1998 and 1999. 1 Negative growth in these years, combined with an inflation of over 60%, led to the announcement of a "disinflation program", accompanied by the 17 th stand-by agreement with the IMF at the end of 1999. 2 The nominal anchor of the disinflation program was a pre-announced crawling peg exchange rate system, formulated in the context of the IMF agreement. The program emphasized on structural reforms, privatizations and downsizing of the public sector and would be in effect for three years until end-2002. But it was short lived; following a twotier crisis in December 2000 and February 2001, the crawling-peg system was ended to be replaced by a floating exchange rate system. Thus came in the 18 th stand-by agreement accompanied by a sizeable IMF credit. The 18 th agreement ended in 2005 in a state of relative tranquillity, but the authorities, with insistence of big businesses, asked for the 19 th agreement. The argument was that the agreement would provide an anchor for policy, would encourage capital inflows, and help dampen exchange rate fluctuations. 3 Thus, the 19 th stand-by agreement became effective for a three year period from May 2005 to May 2008. It was becoming clear in May 2008 that the global crisis was reaching the shores of Turkey. Once again, insistent calls for an IMF agreement started, with the same old argument that it will be an anchor for policy and a safeguard against the global crisis. This must be a good example of what Akyüz (2008, p. 16) describes as "Lack of self-insurance against a sudden stop and reversal of capital flows, and excessive reliance on help and policy advice from the International Monetary Fund (IMF)." But this time, the government, after an election victory in the summer of 2007, declared its reluctance to sign another IMF agreement. The issue is still hotly debated at the time of writing in September 2009.

Journal of Balkan and Near Eastern Studies, 2015

This paper investigates the Turkish economy within a comparative historical framework. In light of a thorough discussion of Turkish economic crises in the post- 1980 period, the paper explores Turkey’s contemporary strengths and weaknesses in the global economic arena by comparing it with its peers and developed nations. The paper also highlights Turkey’s extant economic vulnerabilities, especially its current account deficit, volatile international capital flows and ongoing banking sector problems. Along with other policy recommendations regarding these vulnerabilities, the paper proposes the introduction of capital controls to enhance economic institutions and cope with future hardships.

2018

Developing countries have encountered many economic crises since the 1980s, due mainly to structural problems related to their integration into the global economy. The Turkish economy is by no means an exception, and suffered significantly from the crises of 1994, 2001 and 2008–09. This paper investigates the tales of these three crises to shed light on the propagation mechanisms of crises and their implications for developing countries, given the Turkish experience. Our study is aiming at complementing existing studies by giving a very broad comparative picture of the main macroeconomic trends before and after the crises at the expense of ignoring many important details explained in other studies. This comparison can be also useful for understanding possible (and under current conditions highly unavoidable) implications of current developments in Turkish economy. Although there are many differences in the emergence of recent crises in Turkey, significant similarities can be found b...

The International Journal of Business and Management, 2011

Turkey was one of the worst hit countries from the global crisis that started in September 2008. She had relied heavily on external financing by charging a high interest take. Her external debt and current account deficit had risen and the lira had become overvalued. Following the global crisis, the fall in the flow of financial funds, direct private investments (DPIs) as well as exports caused a great fall in her GNP. But though refusing to make a stand-by agreement with the IMF, she managed to relief relatively fast; gradually lowering the interest rate. As detailed statistics attest, before the years ‘90s and the onset of globalization her international economic relations had already started to diversify; with the share of Middle Eastern Islamic countries and Russia rising. After the 2008 global crisis economic problems in many EU member countries put further brakes on the EU. Hence, Turkey was obliged to further diversify her exports, imports, inflow of financial flows, DPIs as ...

Turkey was not affected by the financial crisis as much as the advanced economies and managed to rapidly exit the turmoil. The reasons behind the strong response and quick recovery of the Turkish economy were its low country risk and low currency risk premiums. This study shows the foundations of these low risk premiums and compares some measures of these risks of the Turkish economy with peer countries. Second, this paper demonstrates that all of Turkey’s economic sectors were very strong before the crisis and sustained this strength during the course of the crisis. Finally, it discusses the policies that have already been taken and planned to be taken by Turkey’s economic authorities. The government seems to be very determined in keeping fiscal discipline as tight as necessary while not being excessive

2010

Research on Business

of strategies to support the recovery of the economy and minimize the risks of relapse into stagnation. The key regions of the world economy continue to underperform pre-crisis developments, This showed that lots of countries still can’t handle the effects of crisis. On the other hand, the reasons for the depth and length of the crisis are several, but many of the tensions and imbalances that fed the crisis resulted from deep-seated trends that are unlikely to reverse in the coming decades, at least without major changes in policies. The recent studies showed that the global economy will be in a process of restructuring while, pursuing and monitoring of national and regional policies will become harder in the near future. The global tendencies indicate that there will be a major shift in specialisation amoungst countries which will in turn change the distribution of added value in the whole world. In this work, we discuss the changing position of Turkish economy in a changing/shifting world from a multidimensional perspective. The analysis is applied to the Turkish economy for the 1980-2015 period, and it is divided to two sub-periods that are 1980-2008 and 2008-2015. Data used in this study are basic macroeconomic indicators published by TUIK and the globalization indices are taken from the work Axel, Gaston and Martens (2008), human development data on Turkey, published by UNDP. The source of the data for World Economy are obtained from OECD, World Bank, Eurostat and UNDP. In this paper, by analysing the basic macroeconomic indicators like growth, industrial production, the structure of export and import, inflation, unemployment, we also focuse on human development, institutions and democracy In this work, beyond the analysis of the current situation, we evaluate the challanges and possibilities Turkey will face in the near future, by focusing on the variables which will have an impact on the economic and social performance of the country.

The Ravages of Neo-Liberalism: Economy, Society and …, 2002

Institute for International Political Economy Berlin, 2019

Turkish economic growth depends on capital inflows and access to cheap credit sources. Once the global financial conditions tightened in 2018, Turkey was among the emerging markets that suffered the most. This article analyses the making of Turkey’s economic crisis in 2018-2019, while elaborating the phases of Turkish financialisation. It locates the slow-motion drift of Turkish economy within the context of dependent financialisation and argues that a long-term account is needed to grasp the economic turmoil of recent years.