Friday, March 29, 2024 | Ramadan 18, 1445 H
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EDITOR IN CHIEF- ABDULLAH BIN SALIM AL SHUEILI

The impressive growth of Turkey

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Readers that follow my weekly column, might have noticed that over the past month I have temporarily moved from talking about SME to a more global scale of economy and finance.


The reason for this shift is that what is happening in the world is quite extraordinary. The Western world is opening up after Covid-19, while Asia seems to close down once again.


Moreover, from the economy perspective, incentives that were generously distributed during the hardest part of the pandemic lockdown, are running dry and from July most markets would run free from cash injections.


In the last column I have talked about the long and short terms repercussions of inflation on our day to day life. Today I would like to talk about a specific case, that is representing a middle ground between the West and the East: Turkey.


Treasury and Finance Minister Lütfi Elvan recently announced that the country is expected to have grown around 20 per cent in the second quarter of 2021. This number is not only spectacularly high, but also unexpected as the previous forecast placed growth at 5.8 per cent.


“We expect double-digit growth in the second quarter of the year due to a strong base effect.” he said. “It is probable that we see a growth rate for the full year higher than the medium-term economic program due to investments, industrial production and foreign demand,” the minister noted.


The reasons behind such a stunning performance are many and diverse. The first data to point out is that during the same period last year, Turkey’s economy contracted 10 per cent, therefore a certain degree of organic bounce-back was expected. But this accounts for only part of the growth shown in 2021. In fact, despite the 10 per cent contraction of Q2, 2020, Turkey was one of the few countries in the world that managed to show an overall growth last year, 1.8 per cent, mainly due to a state-lender-led credit boom mid-year.


2021 started well for Turkey with a 7 per cent growth in the first quarter. The Government credits such an impressive performance to the ability of tackling the pandemic. The country is currently delivery and inoculating 1 million vaccination doses every day, while the number of daily positive tests fell to around 5,000 from 60,000 at the peak.


Elvan is confident that such achievement in controlling the pandemic would manifest in further growth through tourism, which remains a key sector for Turkey.


However, not all that glitters is gold. The country must ensure a reduction in inflation, which last year plagued the pockets of consumers. Over the past 4 years, the inflation was stable in the double digits and the exchange rate had high volatility.


“We have to get rid of high inflation,” Elvan noted.


“Disciplined and predictable policies will bring success in fighting inflation. This country needs low inflation and exchange rate stability. Without price stability, we cannot talk about sustainable growth and prosperity growth.”


The unexpected 17 per cent inflation reported in May was seen as a sign of relief, marking a low point compared to the recent highest one.


This could have been caused by the full lockdown early this year, so now Turkey faces the challenge of keeping prices and currency within control to avoid wasting the economic growth achieved. The aim is to bring it down to 5 per cent by 2023.


[The columnist is a member of the International Press Association]


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