Economic situation analysis in Turkey
Turkey experienced a major financial and economic crisis in 2018. The economic crisis was a result of a debt and currency crisis. Turkey’s currency, Lira, has had a tremendously plunging in its value by 40 percent against the American dollar. As a result, the cost of importing goods become more expensive, and there was high inflation. The crisis was caused by excessive current account deficit and hugely long and medium foreign currency of where two-third of the debt being owned by the private sector. Besides, President Erdogan’s authoritarianism and his ideas on the interest rate policy has contributed to the crisis. Moreover, the geopolitical conflict with the United States has worsened the crisis.
Turkey has had intense business diplomacy and thus has signed free trade agreements with more than 20 countries and intending to sign agreement more than the other 17 countries in the future. The free trade agreement has boosted Turkey’s ever-growing exports. The open market significantly impacts the economy of Turkey, where 54.2% of the country’s GDP is from both exports and imports. Turkey mainly imported goods are oil and gas while the exports include motor vehicle and automotive parts, iron and steel, and industrial machinery. Turkey’s main trade partners are Russia, China, and Germany. Turkey is a free-market country; there is no restriction on the movement of capital; therefore, citizens and foreigners have the liberty to make an investment where they choose.
The industrial, service mainly drives Turkey’s economy, and food processing and textile sector. The industrial sector includes the automotive, petrochemical, and electronics industries. Even though the agricultural and textile sector is not as strong and relevant as in the past, they account for 25 percent of employment. Other than the economic crisis that happened in 2018, Turkey’s economy has always been flourishing, mainly due to the open market. However, international investors have fled Turkey, and import has become expensive due to the economic crisis; thus, the economy has declined.