Fears for economic derailment in Turkey

Fears for economic derailment in Turkey


Davutoglu has taken measures for the reduction of imports, credit growth and increase of domestic production

By Manolis Kostidis – Ankara

The turkish economy is showing signs of “derailment” and Ahmet Davutoglu with the new package of measures he announced seems to be trying to prevent the worst. The growth rate of the GDP of Turkey will remain at 2.5% in 2014, while in 2012 it had reached 9.5%. The current trade deficit and the credit growth concerns the financial headquarters of the Turkish government.

“Our goal is to increase the GDP of Turkey at 1.3 trillion dollars, the reduction of the current trade deficit from 7.9% to 5.2% and the drop of the unemployment rate to 7% through programmes for the transformation of sectors of the economy by the end of 2018″, Davutoglu said. Unemployment in Turkey has reached 10%.

These announcements were preceded  by Moody’s report that spoke of the probability of the slowing of economic growth and of a fragile investor confidence”.

The agency rated Turkey with Baa3, which is the lowest investment grade, with a negative forecast.

30% increase of the “red” credit cards

Another point of concern is the rapid increase in the number of Turks who are unable to pay the installments of their loans and credit cards. The percentage of bad debtors increased by 30% compared to 2013, according to the Turkish Statistical Institute. According to the Turkish Banks Association, only in June 2014, 186,000 Turks did not pay the installments for the repayment of loans and credit card.

The main reason for not paying the installments is the increasing inflation, which after many years is approaching 10% and the similarly rise of unemployment.

The architect of the economic policy had accused Erdogan model of being a “bubble” .

A few months ago, before Erdogan’s transition to the presidential chair, the deputy Prime minister responsible for economic policy Ali Babacan had expressed his disagreement on the economic model of Turkey and had stated that “we have buried all our wealth in the ground, in the shopping center, luxury homes and we forgot how to produce”.

The new measures

With Erdogan in his new palace, Davutoglu in cooperation with Babacan, announced the economic measures and policies for the next four years titled “the great transformation-change” that include 1360 measures in 25 sectors towards a more productive turkish economy, which overturns the economic policy that had the stamp of Erdogan

Among the measures are included the strengthening of the domestic industry, especially of the agricultural production, technology, reduction of energy dependence, the preference of domestic products in government procurements, the strengthening pharmaceutical industries and medical accessories and a clear decrease of loans for residencies and commercial centers.

Similarly, the Turkish government is trying to implement stricter measures to contain the credit expansion of banks that were received in February 2014. Erdogan, until recently was pressuring the Central Bank to cut the lending rates.

In these measures are include those that have to do with the reduction of  energy, while until recently with Erdogan in power, gravity was given only in the generation of electricity (nuclear power plants, thermal power plants gas etc.)

The Turkish businessmen invest abroad

Even the Turkish businessmen are worried as just in August 2014 they invested 4 billion dollars abroad and not in Turkey.

Last week the largest food industry of the country, ULKER, took out USD 3 billion from the country to buy the largest british biscuits company, United Biscuits. The government fears that the Turks do not want to invest in Turkey anymore.

Last month the company LEVI’S jeans closed its factory on the outskirts of Istanbul, resulting in 677 Turkish workers getting fired.

Are these signs of a policy change?

BBC argues that “the economic plan of the Turkish government, shows a split of the roads of Erdogan-Davutoglu in the economy and the government priorities. Does this mean a denial of his economic heritage?”

Political analysts in Ankara report that Davutoglu might be sending the message that he will remain in office for the next four years, in view of the parliamentary elections in 2015.

Some go even further to suggest that “perhaps these measures show that the ruling AKP closes the Erdogan chapter and moves the Davutoglu era”.


Photo: www.hurriyetdailynews.com