Erdogan faces rapid growth pains

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BR TURKEY Reuters An election campaign banner of Turkey's first directly elected president, Recep Tayyip Erdogan. Analysts say he will have to fix the damage caused by the rapid growth during his two terms as prime minister. Photo: Reuters

Onur Ant Ankara

AFTER building a political career based on economic strength, Turkey’s President Recep Tayyip Erdogan may have to spend some of the next five years repairing the damage that his pursuit of rapid growth has brought.

Erdogan, 60, won Turkey’s first direct presidential election on Sunday, extending his leadership until at least 2019.

He would now confront an economy nearing the limits of fast-track growth based on encouraging rapid construction and consumer spending at the expense of its manufacturing industry, said Sevket Pamuk, a professor of economics at Bogazici University in Istanbul.

“Growth relying on real estate development has an appeal for the government. However, it’s not sustainable. It wouldn’t allow growth to remain at elevated levels going forward.”

During the second half of his 11-year run as prime minister, growth was less than half the 6.8 percent average of the first half. Demand-driven expansion saw imports outpace exports, contributing to a current account gap forecast to reach 6 percent of gross domestic product (GDP) by year end.

Morgan Stanley listed Turkey among the so-called Fragile Five economies most vulnerable to a withdrawal of the foreign investment needed to finance their deficits. South Africa, Indonesia, India and Brazil are the other four.

Turkey’s GDP climbed to $820 billion (R8.7 trillion) last year from $233bn in 2002 and the debt-to-GDP ratio fell to 37 percent, from almost 80 percent a decade ago. Inflation has slowed, dropping to single digits from over 70 percent in 2002, while more than 5 million jobs have been created since 2007, according to the Finance Ministry. – Bloomberg


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