The Turkish economy: reflections on first quarter data of 2014
According to the latest data released by the Turkish Statistics Institute ( TUIK ), industrial production in the month of March 2014 recorded an increase of 4.2 % . However, the seasonally adjusted about industrial production recorded a contraction of 0.4% .
However, according Reuters data (without seasonally adjusted), Turkish industrial production had an increase of 4.15% compared to the same month of 2013. In general, industrial production reached of 5.3% in the first quarter of 2014.
The values released by TUIK shows that -despite the Lira devaluation, rising interest rates and political tensions- Turkey’s economic growth has been stronger than expected .
The strongest sector of the Turkish economy has been manufacturing. In fact, since the devaluation of the Lira manufacturing had a rise in the volume of exports. Despite the collapse in consumer confidence, in fact, the growth indicators are showing mixed signals, with a significant increase in exports due to the recovery of European markets .
The Turkish Ministry of Economy has also released data on FDI about the first quarter of the year. Foreign direct investment (FDI ) in Turkey increased by 50% in the first quarter of the year, reaching 4.2 billion U.S. dollars. The increase, compared to the same period last year, was of 49.6% ($ 2.7 billion U.S. dollars). However, in 2013, FDI inflows amounted to 12.6 billion , 4.1 % less than the previous year.
The flow of FDI is distributed as follows: the manufacturing sector was the one who most benefited from foreign capital ($ 1.04 billion ), followed by the energy sector -with 808 million ( 61.9% of foreign direct investment )- of which almost 2.6 billion from the European Union . According to the ministry, last March in Turkey were formed 267 new companies have been added to the 38.116 companies already active in the international capital in the country.
According to the Investment Support and Promotion Agency ( Ispat ) , Turkey could continue to attract foreign investment in the near future – above all in the energy , banking, insurance and finance.
Many analysts think that the expansion period of the Turkish economy, which coincided with the coming to power of the AKP in 2002, is coming to an end. The official data about the years 2002-2012 reveal amazing progress, such as- for example – the increase in individual income, which rose by 3,676 to $ 10.666. The Turkish economy passed a very positive decade, in fact the growth has been accompanied by the substantial reduction of public debt (reduced by 30 percentage points) and by the decrease of the indicators of inflation and deficits.
However, the European Bank for Reconstruction and Development (EBRD) said that in 2014 the Turkish growth may slow down compared to the previous year.
According to the EBRD document, in fact, since the beginning of 2014, Turkey faced many difficulties in the economy mainly due to political uncertainty and higher costs of finance. As a result, the EBRD announced that, for 2014, expectations for growth in the country fell by 3.3%; in fact, expectations for growth were 2.5% in January, they were of 4% in 2013.
Policy tapering of the Federal Reserve in the U.S.-which is the end of the policy of buying government bonds, which has traveled in parallel with a strategy of strong reduction in interest rates – could damage Turkish economy. The Fed policy had positive effects on emerging markets ( as Turkey, Brazil, India and China), who become a popular destination for foreign lenders. In any case, clarifies the EBRD , Turkey’s growth has been stronger than some analysts had predicted and international institutions at the beginning of the year and a slight acceleration (3.2%) is expected in 2015.
The EBRD, which was originally established with the purpose of making investments in the countries of the former Soviet bloc, also noted that the crisis in Ukraine could hurt demand for exports of Turkish products as well as the income of the tourism sector. In addition, the economic slowdown of Turkey, exacerbated by geopolitical crisis between Russia and the West, could have a negative impact on economic performance of the region.