Turkey’s Hidden Economic Disaster Fostered by Unorthodox Policies in Isolation
33 Pages Posted: 8 Feb 2021
Date Written: February 8, 2021
Huge difference a decade makes; from an uninterrupted growth in one decade (i.e. birth of the Justice and Development Party – AKP in August 2001 and the rise of the AKP during 2002-2013) to another decade of unorthodox policies induced by ever more authoritarianism (i.e. the loss of Istanbul and Ankara in the 2018 local elections marked the fall of the AKP. The Turkish economy under the AKP has endured both positive and negative developments; on the positive side, the start of Turkey’s accession negotiations (2005) to join the EU created positive investors sentiment, in turn continued capital inflows (dollar glut – cheap dollar) gave much needed boost to industrial production and mega infrastructure projects (airports, roads, bridges, etc.). Credit-fueled consumption allowed the Turkish economy to expand over 6% YoY (peaked at 11.8% in March 2011) and GDP per capita reached an all-time high of $12,582 in December 2013, placing Turkey in the group of high-income countries (16th largest economy as of 2013). On the negative side, Turkey has been accused of divergence from its Western allies due to its new ambitious foreign and defense policies; consequently, Turkey’s bid to join the EU is in limbo as its accession negotiations have been stalled, plus the EU refuses to renew the Customs Union agreement citing the issues related to Turkey’s energy exploration in the Eastern Mediterranean and Turkey’s refusal to open its ports to Cyprus. Turkey’s relations with its neighbors and allies are severely strained in recent years; the US-Turkey relations came to a breaking point after Turkey proceeded with its decision to purchase S-400 missile defense system from Russia. Especially in the aftermath of the July 2016 coup attempt, Erdoğan’s AKP government increased its authoritarian ways, this caused a serious amount of irregularities in the rule of law, and a significant deterioration in human rights (rights of minority groups), freedom of expression and freedom of media (opposition is completely silenced); consequently, all economic and financial indicators have been at their worst levels in 2020 (GDP contracted nearly 10% and GDP per capita dropped to $9,126 in 2019).
Keywords: Justice and Development Party; Authoritarianism; Unorthodox Policy; Sanctions; Turkey
JEL Classification: O31, G12, E42, E50, F60, C40, Q32, Q54, H23, I10
Suggested Citation: Suggested Citation