Turkey’s economy is in recession and will actively promote reform

Release time：Apr 22, 2019 From：admin

According to statistics from the Turkish Bureau of Statistics, gross domestic product (GDP) fell by 2.4% in the fourth quarter of 2018, which was the second consecutive quarter of economic decline since the third quarter contracted by 1.6%.

For the whole year of 2018, Turkey's GDP growth rate was 2.6%, much lower than the 7.4% in 2017. Especially in the fourth quarter of 2018, construction output decreased by 8.7% year-on-year, industrial output shrank by 6.4%, household consumption expenditure fell by about 9%, and economic fundamentals accelerated.

Affected by the deterioration of the relationship between Turkey and the United States, the exchange rate crisis in Turkey. For the whole of last year, the Turkish lira fell by 30% against the US dollar. To curb the Rila downtrend, the Turkish central bank was forced to raise the benchmark interest rate to a staggering 24%, further cooling economic activity. Due to the sharp depreciation of the lira, the cost of corporate debt repayment has increased, and many companies have filed for bankruptcy. In addition, Turkey is also facing high inflation problems. In October 2018, the consumer price index (CPI) rose by 25% year-on-year, a record high in 15 years. In March of this year, the CPI was 19.71%, which is still surprisingly high.

The World Economic Outlook Report recently released by the International Monetary Fund (IMF) predicts that Turkey will shrink by 2.5% this year. The OECD also lowered Turkey’s economic growth forecast for this year from a previous 0.4% increase to a contraction of 1.8% in March.

The Turkish economy rebounded rapidly after the recession during the 2009 international financial crisis, achieving an average annual growth rate of 6.6% between 2010 and 2017. But economists generally believe that unlike the previous "V-shaped" recovery, the recovery is expected to be more difficult and slower.

In addition to geopolitical influence, the economic dilemma of Turkey is due to the long-term imbalance of economic structure and high dependence on international capital. The previous high-speed economic growth was based on the rapid inflow of international hot money. As global economic uncertainty increases and downside risks increase, structural shortcomings are exposed.

Nayir Orpak, chairman of the Turkish Foreign Economic Relations Committee, believes that Turkey can only achieve sustainable economic development if it establishes a sustainable and balanced growth model and boosts manufacturing. Earlier this month, the Turkish government announced a new round of economic reforms, prioritizing financial sector reforms and pledging to actively promote economic restructuring.