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Turkey's economy has shrunk, foreign investors are leaving the country

Turkey has suffered from almost paralysis of air transport which has left its tourist sites hungry for tourists.

The closure imposed across the EU has hampered exports of vehicles and other manufacturing products from the country

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• Turkey

Wall Street Journal

Tuesday, 01 September 2020, 11:04

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Turkey's economy, hard hit by the corona plague, shrank sharply in the second quarter of this year, undermining President Recep Tayyip Erdogan's key political commitment to quickly restore economic prosperity.

Turkish GDP fell in the second quarter by 9.9% compared to the corresponding quarter in 2019, and by 11% compared to the first quarter of 2020, the National Statistics Agency reported yesterday (Monday).

Turkey has suffered from almost paralysis of air transport, leaving its tourist sites hungry for tourists, and months of closure imposed across the EU, which has hampered exports of vehicles and other manufacturing products from Turkey.

"Contrary to pessimistic statements, our GDP has shown good results compared to other countries," Finance Minister Brat Albirak wrote on Twitter, watching a V-shaped recovery. They are healthy and dynamic, "he added.

Economists, however, have warned that the difficult months are still ahead of us.

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Those investors who turned Turkey into a regional power are now fleeing it.

Erdogan (Photo: Reuters)

"Turkey has lost confidence in foreign funding sources"

The main concern is that Turkey, which is heavily dependent on international funding, has kept away from many of the foreign investors who helped Erdogan turn the former backward economy into a regional power in the first decade of its 18-year rule.

By keeping the basic interest rate below the rate of inflation, the Central Bank of the Turkish deterred investments denominated in pounds Turkish, and made realizations of bonds and shares Turkey by foreign investors this year.

"Turkey has lost the confidence of financing sources strangers," said Mustafa Sonmz, economist Mainstnbol. "If foreign funding does not flow in, the country's economy can not grow."

even the government's policy of encouraging the growth by extending loans in the past year relationship and did nothing. Azskim and households were encouraged to take cheap loans, fell to foreign products as well as tourism investment , And reduced the foreign currency entering the country, with a widening current account deficit in the balance of payments. This increased downward pressure on the pound, which fell to a low against the dollar a few weeks ago.

Turkish exporters say the weakness of the pound has become problematic. At Meloni, a Turkish door-to-door manufacturing company with customers in Russia and across the Middle East, CEO Haki-san said he buys most of the components - copper and aluminum and wood - in dollars.

"We are not profiting from the devaluation of the pound," Sen said at one of the hotel shops in Istanbul.

"True, dollars come in, but they come out too."

In an attempt to halt the decline in the pound, the central bank has taken steps to tighten its money supply in August, and many economists now expect another economic downturn and a jump in unemployment, after years of rapid growth have increased political support for Erdogan.

The International Monetary Fund announced in its June forecast a 5% contraction in the Turkish economy this year.

The Turkish Statistics Agency says that about four million people in the country are unemployed, a rate of over 13%.

The DISK trade union from Istanbul says another six million workers have lost their jobs due to the epidemic.

In recent weeks, Erdogan has initiated several political steps to revive religious and nationalist sentiment, including the conversion of Aya Sophia, which has served as a museum for the past 86 years, back into the mosque, and a confrontation with Greece over control of disputed territories in the Mediterranean.

"Erdogan is trying to maintain his support base, but dissatisfaction is widening," said economist Sunmez.

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