Erdogan received by supporters upon his return from Davos
Photo: AFP
Erdogan's financial trouble deepening
Turkish prime minister may have returned from Davos as a winner, but economic figures presented to him since then have probably caused him to lose some sleep: 2008 saw rise in trade deficit, unemployment rate, while Turkish economy shrunk by 5% in last quarter of year
Turkish Prime Minisrer Recep Tayyip Erdogan may have returned to his country as a hero
from the World Economic Forum in Davos, following his heated debate
with President Shimon Peres,
but the financial figures presented to him since then have probably caused him to lose some sleep.
The Turkish exporters managed to increase their sales by 23%, putting them at about $123 billion, but last year's import was up 19%, totaling a little over $200 billion.
According to official data released Sunday, Turkey's trade deficit in 2008 rose by 11% compared to 2007, totaling some $69.8 billion.
Previous Column
Gil Feiler, Doron Peskin
Syria spends 90% of its water on industry and agriculture, while Damascus residents are forced to buy water in black market, fear catastrophe. Transporting from Euphrates River costs $2 billion, can only be executed if funded by Japanese government
Ankara's main export market is the European Union, which has been affected by the global financial crisis. The Turkish export to EU countries constitutes about 42% of all Turkish exports. Turkish exports to the EU in December 2008 totaled about $3 billion, a drop of nearly 40% compared to the same month in 2007.
The growth data and the labor market's situation also carry some bad news for the Erdogan government. The Turkish economy recorded a negative growth rate of about 5% in the last quarter of 2008, and according to the Moody's credit rating company, the Turkish economy is expected to shrink by 0.5% in 2009.
The unemployment rate in Turkey is believed to stand at more than 11% these days. At the end of November 2008, the unemployment rate was 10.9%, compared to 9.7% in the same period in 2007. The unemployment rate in the urban areas was higher than the national average at the end of 2008, totaling 12.8%.
It appears that the unemployment trend will increase in light of the financial crisis. The Ford Otosan company, for example, announced that it would freeze production in both of its factories in Turkey due to lack of demand. Each factory will halt its work for about two weeks. During the last quarter of 2008, Ford Otosan reported a 50% drop in its production.
Seeking new loan from IMF
These alarming figures forced the Turkish government in recent days to relax its stance in regards to the International Monetary Fund's demands, in a bid to guarantee a new loan agreement.
The talks between government delegates and the international body's representatives ended without an agreement last week, due to a dispute over the required fiscal reform. The Turkish government is currently deterred by the fund experts' demand to raise taxes, cut expenses and reduce the growth objective to 1.5% this year.
The Erdogan government's economic experts estimate that the country's financial deficit will total some $30 billion in 2009, and have therefore began conveying conciliatory and positive messages to the IMF after the Davos conference.
According to Turkish reports, the new loan agreement with the IMF will stand at some $15 billion. Turkey currently owes the IMF more than $8 billion for aid packages from previous years.
As part of the positive atmosphere, Turkish Minister Mehmet Şimşek on Monday praised the IMF and claimed that a new aid package would convey a relaxing message to the private sector.
"We view the Monetary Fund's plan as a form of insurance," Şimşek stated, adding that "we must have such a plan, with or without the Monetary Fund."
Dr. Gil Feiler is founder and managing director of Info-Prod Research (Middle East) Ltd. , and Doron Peskin is head of research
