Istanbul is a bustling center of one of the world's fastest growing economies. Recent figures revealed a 8.5% growth for 2011. However, the fast growth does not come without side effects for Turkey. For example inflation rate for march was 10.4%. Even bigger concern is Turkey's dependence on foreign capital for economy. It is even more concerning that most of this capital comes from the banking deals and therefore can leave as easily as it entered. However, enthusiasts are sure that the advantages far outweigh the economics problems of Turkey. Its domestic market is big and is expected to grow even further.
The central bank of Turkey has recently adopted a policy to help Turkey overcome "hot money" problem, associated with the euro crisis. The objective of the government is a 5% interst rate, which Turkey projects to hit in 2013.
Another one of Turkey problems is competitiveness of turkish businesses, many of which prefer to stay small, due to many imposed regulations. But the main concern is still that current-account deficit and "flighty" capital, will weaken Turkey and make it less resilient for economic troubles.http://www.economist.com/node/21552216
2 comments:
Asset prices are currently overvalued and this is making investors weary. In order to reduce the current deficit, the government should reduce debt and increase the price of imported goods.
It would seem like a good idea for Turkey to allow for some inflation so as to contract the economy somewhat and minimize the effect of inflation. If I were an investor and saw that inflation was higher than growth I would be very weary of making substantial investments in that country.
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