As neighbor Greece continues to suffer from its economic meltdown, Turkey has weathered the financial crisis far better than many other countries, including a significant number of European Union member states. As a result Turkey has become a more integrated and bigger player in the global economy, with a strong emerging economy making it one of only a few countries with post-crisis potential. Therefore, it is not surprising that Turkey is boasting about this achievement at every opportunity, including last week when Turkey’s dynamic and super-smart finance minister, Mehmet Şimşek, was in Brussels. Indeed, after a number of meetings at the European Commission he has come away “feeling sorry” for the EU.Turkey has done incredibly well thanks to a sharp and visionary financial strategy. Ankara has learned from the financial catastrophes of the past. Indeed, Turkey is quite accustomed to financial crises and the recessions that usually follow them, with the recent global financial crisis being the fifth to hit the country in the last 30 years. However, Turkey was better prepared this time and managed to stay afloat as a result of its strong financial foundations, with Turkey making good progress in the financial sector in recent years with an increase of gross domestic product (GDP) from $230 billion in 2002 to $740 billion just before the crisis. Clearly the financial crisis rocked this growth, which led to a 4.7 percent decrease. But the last few quarters have shown a strong comeback, and Turkey is well on the road to recovery.
Unlike most other countries, Turkey had no need for bank bailouts, not one Turkish bank lost money, and during the course of 2009 the banking sector was back in the business of making good money with a return on equity of some 19 percent. That is pretty impressive stuff when compared to the banking sectors of several EU member states. The reason why Turkish banks survived the storm is predominantly down to strict fiscal reforms that were carried out during the domestic financial crisis of 2000-2001 -- when then-Prime Minister Bülent Ecevit brought Kemal Derviş back home to Turkey from the World Bank to sort out Turkey’s troubled economy. While these days Derviş may be back in Washington, his legacy lives on in the banking sector.
Turkey’s economic future also looks quite rosy and the country is emerging quite strongly from the crisis. Indeed the International Monetary Fund (IMF) predicts that Turkey’s economy is set to grow by up to 11 percent. Furthermore, another positive sign for Turkey’s emerging economy is that GDP is ahead of target, which is also remarkable. In addition, in the first few months of 2010, the national deficit decreased by 40 percent for the year. This progress was possible because the government had realized early on that the country was in economic shock and had devised a “game plan,” which consisted of creating a gradual decline of deficit in GDP by 3 percent by 2012. This is pretty sharp thinking.
And while Turkey’s EU membership process may be going at a snail’s pace, it is nevertheless assisting Turkey’s transformation. The EU anchor has helped Turkey do things quicker and in a more coherent manner. Turkey is adapting to European business practices and rules and is also in the process of implementing a new fiscal rule, similar to the one for the euro-zone countries prohibiting them from having deficits of more than 3 percent of GDP. Only Turkey has gone one step further and will not allow its deficit to exceed 1 percent of GDP.
It seems to me that Turkey’s good economic shape turns on its head the perception of many in the EU that portray Turkey as a third world country with a run-down economy which would be a heavy financial burden to the EU if it were to join. This is simply not true, and indeed it seems the opposite is far more likely and that Turkey would be of high value to the EU. Turkey would bring new energy and dynamism to the table as it has a strong emerging economy and in terms of credit ratings, it is the only country in the world to have been upgraded by two notches after the crisis. If the EU is to become a serious global economic player, it needs a heavyweight such as Turkey within the family. Turkey should be seen as an asset, not a liability, to the EU, and EU membership should prove to be a win-win for both.
