Turkish Economy Rebounding Despite The Eurozone

Turkish economy is rebounding better than expectations, despite the growing problems in the Eurozone. After four consecutive quarters of contraction, the first signs of a strong recovery showed itself with 6% GDP growth in the last quarter of 2009. The first quarter of 2010 does look even more promising for the Turkish economy with some analyst growth forecasts of up to %15, making it the second fastest growing economy after that of China among the G-20 countries. The unemployment rate, the biggest challenge for the Turkish economy, has been on a sharp decline from 16.5% in January 2009 down to 14.4% in February 2010, resulting in creation of roughly 1,5 million new jobs.

Even though the percentage of bilateral trade volume with the Eurozone countries went down to 43% from over 50% a while ago, the Turkish economy is still heavily influenced by what happens in the Eurozone. The AKP government’s attempts to reach out to Russia, currently Turkey’s largest trading partner, the Middle East and Africa are paying back in terms of sharply higher trade and greater investment, and Turkey is achieving increasingly more economic integration with its newly found partners every day. Hence, Turkish economy’s vulnerability to the bumps in the Eurozone is decreasing and the country is becoming more of a global player, thanks to its strengthening economy. What is really helping this picture are the solid and liquid state of the Turkish banking system and the low debt ratio of the public sector: The Turkish public sector debt constitutes 49% of Turkey’s GDP, whereas this number reaches an average of 84% in the Eurozone countries. As a reflection of this strong recovery, the Turkish lira is attracting bullish recommendations against the dollar in 2010, with forecasts ranging between 6% to 12%. The Turkish currency has gained 2.4 % last month, the best performance among 26 emerging market currencies.

As a result, IMF raised its forecast for 2010 Turkish economic growth from 3.7% in October to 5.2% in April. Similarly, Goldman Sachs revised its growth forecast for 2010 from 5.5% to 7.0%.