Turkeys Overheating Economy
Last month Turkey announced the statistics related to its economic growth. To the surprise of many people, Turkey had clocked in annual growth of 7.7% per annum. The quarter before this one, Turkey had clocked in growth which was more than 11%. Hence, 7.7% was actually a slowdown of sorts. Turkeys rapidly increasing growth rate has come as a surprise for many. This is because it is growing faster than China and India, two of the fastest growing economies in the world.
However, it seems like Turkey has been following the wrong strategy to achieve this growth. This is because international financial bodies do not seem to be impressed by its growth. Instead, international financial bodies like International Monetary Fund have started issuing warnings about the galloping growth rate in Turkey. Many experts believe that Turkey is moving towards becoming a classic case of an overheated economy.
In this article, we will have a closer look at the story of Turkeys economic growth.
There is another major problem with this strategy. The cost of funds is on the rise in Europe as well as America. It is expected that this bear cycle will last at least for a decade. Countries are trying to reduce their dependence on debt since interest payments are likely to consume a greater part of the GDP in the future. In such difficult times, Turkey is doing the exact opposite and the policies being pursued might increase its dependence on debt. Turkey might end up borrowing some very expensive funds as a result of these policies.
The problem with Turkey is that President Erdogan has won the past five elections because he has been able to deliver on the promise of economic growth. Hence, he wants to repeat the process and win a sixth term. However, in doing so, he may end up pushing the Turkish economy to the brink of disaster.
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