Turkish Economic Markets and Structures
From International Business Wiki
Turkey follows a statist approach to economics with the Turkish government playing huge roles in private sector participation, foreign trade, and foreign direct investment. They also play a major role in industry, banking, transport, and communication. During the 1980’s many reforms were created by the government to help boost the then stagnate Turkish economy. It had short term gain causing rapid growth and rise in GDP until about 2000. The growth was halted or inhibited in the 1990’s by several recessions. This forced an increase in inflation rates and interest rates as well as a drop in GDP. These recessions were mainly caused by the lack of more reforms and widespread corruption in the state. More recently the Turkish government has taken control and more reforms were created. Also the New Turkish Lira was created, replacing the old lira. Because of the chronic inflation the old lira experienced huge levels of depreciation. It got so bad that eventually the Turkish government passed a law that eliminated six zeroes from the old lira and created the new lira. This was in the hopes to create a more stabile and economically practical currency. The Turkish economy is slowly making a comeback with all these new reforms and changes. Inflation rates have fallen, interest rates have fallen, the exchange rate has risen, GDP has gone up, and the government budget balance is almost back to normal (http://research.stlouisfed.org/publications/aiet/turkey.pdf).
Turkeys’ economy is dominated by three main sectors. The three sectors are agriculture, industry, and service. All three play a vital role in the Turkish economy. Agriculture, until recently, was the dominating sector of the Turkish economy. Being the worlds number one producer of hazelnut, fig, apricot, cherry, quince, and pomegranate as well as being the worlds number two and number three producer in many other categories has made the agriculture sector very strong. They have been self sufficient on food since the 1980’s. Ever since the beginning of the era of recessions in Turkey, mainly between the 1980’s and 2000, the agricultural sector has been in decline and giving way to the now growing industrial sector. The industrial sector of the Turkish economy is slowing taking over and growing. The reforms created helped with foreign direct investment and boosted the industrial market. Textiles and clothing are the main industries. Turkey’ Vestel Electronics is the largest TV producer in Europe (http://en.wikipedia.org/wiki/Economy_of_Turkey). The Turkish automotive industry is also on the rise. Still behind Germany, France, Italy, Spain, and the United Kingdom, it makes the Turkish automotive industry the sixth largest Europe. Industry, in general, is on the rise in Turkey so watch out in the next few years to come because you might be driving a Turkish made automobile. The last main sector is the service sector. This is comprised on tourism and finances. Tourism, behind industry, is the fastest growing entity of the Turkish economy. With 11 of the top 100 hotels in the world located in Turkey, more and more tourists have chosen Turkey as a vacation destination. This has increased the revenue that Turkey receives from tourists. Financially Turkey is still highly restricted by the government. The Central Bank of the Republic of Turkey has the sole right to issue bank notes, or the new lira. Turkey has many bilateral investment and tax treaties which cause disputes among investors.
From the early 1920’s to 1980, Turkey operated a centralized and authoritarian economy that carried the country through difficult times following their independence. It was only until the 60’s that Turkey started a coherent program of industrialization, but at the same time, adopted questionable economic strategies that where carried through the late 70’s. This period of industrialization created significant financial problems for the country including market deficits and the extraordinary growth of the external debt. This situation caused a crisis in 1977 that forced a change in the economic strategy of the country.In 1980, Turkey saw the beginning of a real economic revolution that was fueled among others, on relying on the natural strengths of the market, growth through exports, a reduction on taxes, a merge with the dynamic global economy, and encouraging privatizations. Since then, the economy has seen a constant growth rate occasionally disturbed like on 1994 and 1999 by several problems such as the extremely high rates of inflation, high deficit of the public sector, lack of foreign direct investment, and the imminent weakness of the financial structure of the country.In 2001, due to the worldwide recession, Turkey became across a new episode of economic crisis caused by the increasing amount of debt the country was getting into to fill the financial gap that brought the events of September 11 2001. This crisis also caused for turkey to become one of the most in-debt countries in the world diminishing the interest of foreign investors and worsening the ability to overcome the difficulties of super high inflation and constant threats to the political system of the country.From 2002 to 2007, the country has seen a substantial improvement in their economic practices by radically lowering inflation and increasing direct foreign investment sparked not only by the predominant agriculture sector, but also by the increasing automotive, electronics, real estate and oil production sectors. However, despite the recent economic growth the country still faces difficulties due to the continuing high debt and public sector deficit which prevent this great country of becoming a very important player in the world’s economy.
