By Barış Soydan
August 22, 2018
Last year, Turkey was the fastest growing economy among the G20 countries. Now it is going through a severe currency crisis. The lira has lost more than 40 percent against the US dollar this year. A recession is at the door. President Recep Tayyip Erdoğan accuses the United States of waging economic 'war' against Turkey and has threatened to ‘look for new allies’. Yet Turkey has no alternative to Western capital, and will sooner or later going to have to do whatever it takes to restore the confidence of Western investors.
Korkut Boratav on the sendika.org site writes that there is a curious expectation among liberal and some leftist circles that Turkey, because it is supposedly one of the most fragile of the emerging markets, faces the threat of the desertion of financial capital as the world economy has become volatile, and that this is supposedly going to bring about the end of the AKP power. First of all, there is no ground for saying that the fragility of the Turkish economy is bound to produce an immediate crisis. Secondly, financial capital is not against the AKP. In the current global economic conjuncture, Turkey is in fact in a more favorable position than the energy exporting economies of the periphery like Russia that are especially hard hit. Turkey on the contrary benefits from the fall of the price of oil, which helps to slow down the growth of its current account deficit; the low budget deficit ensures that Turkish state bonds remain reliable instruments of investment. Chronic vulnerabilities do cause the Turkish economy to slow down during 2015, leading it toward a path of zero growth; however, the expectation of a dramatic crisis erupting before the election does not seem realistic. And what about the political uncertainties that the AKP causes? What about the possibility of Turkey becoming an Islamic fascist regime? Does finance capital care? The AKP’s string of electoral and referendum victories have led finance capital to pour money into the Turkish stock market and into Turkish state bonds.
The Turkey Analyst is a publication of the Central Asia-Caucasus Institute & Silk Road Studies Joint Center, designed to bring authoritative analysis and news on the rapidly developing domestic and foreign policy issues in Turkey. It includes topical analysis, as well as a summary of the Turkish media debate.