The Turkey Crisis: Part II

Last week, we covered Turkey’s geopolitics and history.[1] This week, we complete the series, starting with a discussion on Turkey’s economy with a focus on the changes brought by the Justice and Development Party (AKP), led by President Erdogan. We will also examine how foreign debt affects Turkey’s economy and financial system, highlight the impact of the 2016 coup and analyze the causes of the current crisis in Turkey. From there, we will discuss the debt problem and Turkey’s options for resolving the crisis. As always, we conclude with market ramifications.

The AKP’s Economic Program

Erdogan’s economic policies have clearly boosted Turkey’s economic growth.

This chart shows Turkey’s GDP; we have log-transformed the data. We have calculated the growth trend from 1987 through 2001, the period of Kemalist rule. Note that since taking control in 2002, Turkey’s GDP has exceeded the previous trend.