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Turkish Recession On The Horizon?

Anxious economists and investors have fresh cause for concern as Turkey’s economy falters, stumbling from a peak of 9 percent GDP growth in 2010. The FT’s beyondbrics blog has the story:

In what Benoit Anne of SocGen described as “the first bloodbath of the New Year”, rates on Turkish one-year currency swaps surged by more than 60 basis points on Tuesday after inflation in the 12 months to December came in at 10.4 per cent, way above target, and the central bank continued to sell dollars to prop up the lira.

But the flood of data shouldn’t distract attention from Turkey’s big issue: its huge current account deficit of about 10 per cent of GDP.

This will not help stabilize the Middle East. Stable and prosperous Turkey has been a model for Arab Spring protesters and new governments in Egypt and Tunisia. Turkish aid and Turkish technical assistance combined with the model of a modernizing Islamist democracy have been among the few real rays of hope in many countries. Enthusiastic crowds came out to meet Turkish Prime Minister Recep Erdoğan on his recent tour of the region.

Homegrown problems plus the slowdown in Europe are casting a shadow over Turkey these days. How the ruling Islamist AK Party measures up to a new set of challenges will have important consequences in much of the world.

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  • BD

    Stop quoting SocGen analysts. I know from personal experience that it is a house of ill-repute.

  • Kris

    Spengler has been predicting this (and much worse). For his troubles, some have branded him an “Islamophobe.” I doubt we’ll have long to wait before the predictions (cautionary analysis) of noted Argentinophobe Mead come to pass.

  • Cunctator

    No surprise here. Turkey’s government has been spending money it does not have to maintain its support in the slums and rural areas. Artificially low interest rates have further fuelled a likely recession.

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