Turkey at a crossroads

IFR (International Financing Review) May 2015

IFR Turkey Special Report 2015

To say that Turkey is at a crossroads and must choose its future direction is simply to state an age-old truth: it always has been. At a crossroads geographically, Turkey is at the crossroads of Europe and Asia, an ornate doorway between two regions. The EU’s endless debates over the merits of letting it join have only emphasised its unique location – while fuelling its frustration.

Turkey has also become an energy crossroads, with tanker traffic and oil and gas pipelines placing it squarely at the centre of the compass. Historically, it looks west for institutional models while looking east to anchor its conservative cultural instincts. And politically and economically, it has contorted itself trying to reconcile authoritarian reflexes and backward hinterlands with the allure of pluralist democracy and economic liberalism.

But despite having all the ingredients for success and strong fundamentals – a favourable regulatory environment, demographic advantages, a robust banking sector, a growing local bond market, a broad export base, and the recent benefits of low oil prices – the world’s 18th largest economy is lost and scrambling to find its way.

This is because the economic momentum that Turkey has enjoyed has become bogged down in political mud – something blinkered economists often fail to factor in.

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