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For the last 10 years, Turkey has been a growth miracle. It increased exports by afactor of ten; GDP and per capita income rose threefold. But the cornerstone of that economic success – political stability – is now under threat.
Prime minister Recep Erdoğan isn’t on the ballot in Sunday’s local Turkish elections, but they’re all about him, says Oray Egin. Erdoğan blocked Twitter (the ban was laterreversed), succeeded in shutting down YouTube due to “national security concerns”, has been caught up in a bribery scandal, and was the target of massive protests.
But economically, it’s not enough that the AKP maintain a simple plurality of support.Finance minister Mehmet Simsek says the AKP must win at least 40% of the votes to show that “political stability is not under threat”. Anything less, and the government will lower its 4% annual growth target.
The reality is that figure is probably already fanciful. The WSJ reports that “Turkey’s economic growth is widely projected to drop by half to 2% this year”, government bond yields have hit their highest levels since 2009, and the lira has lost a quarter of its value in the last year.
What happened to the economy lauded by World Bank president Jim Yong Kim as ““an inspiration to many developing countries”? Foreign Affairs’ Daniel Dombey says its down to “a lack of balance in the country’s economy”. Turkey has a current account deficit that’s 7% of GDP, and can’t seem to get away from a reliance on domestic consumption and short-term borrowing.
In those circumstances, when foreign investors begin selling government bonds, as they did in January, even drastic governmental action has limited effect. – Ben Walsh
On to today’s links: