Turkey, three other members of proposed MIST on 'crisis-proof' list
Turkey, along with South Korea, Indonesia and Mexico, is among the top four nations on a list of seven countries named fastest to emerge from the 2008 global financial crunch as part of a report published in Foreign Policy's November issue.

These four countries, labeled "crisis-proof," are members of a proposed agglomeration of large "emerging economies" known as MIST, a term coined by Goldman Sachs economist Jim O'Neill.

The report emphasizes that Turkey's strong economy stands out despite problems in the European Union, which it aspires to join, and cites critical reforms carried out by the incumbent Justice and Development Party (AK Party) government towards a relatively more liberalized investment environment and stricter regulations. Another critical factor the report identifies in the country's economic success is the diversification of Turkey's exports market. The share of its main trading partner, Europe, in Turkey's exports declined to 38 percent in October from a much stronger 47 percent in the same month in 2011, indicating the country had profoundly diversified its exports markets.

The report, however, mentions certain risks with the potential to undermine Turkey's economic strength, which need to be addressed; namely, high inflation and the need to boost foreign direct investment (FDI). A possible failure to join the EU could in fact be to the benefit of Turkey, the report says, referring to financial problems in the union. Turkey saw FDI inflow increase by $1.4 billion in January-June to $8.2 billion over the same period a year before. Furthermore, official data show that Turkey's annualized inflation of consumer prices slowed to 7.8 percent in October, marking the lowest level in 11 months after rising sharply in the preceding month.

Fitch's upgrade of Turkey's investment rating from BB+ to BBB- this week -- along with an anticipated upgrade by rival Moody's -- is expected to speed up the flow of FDI entering Turkey. The Turkish Central Bank earlier remarked that it envisaged inflation dropping further through the end of this year.

The Turkish economy grew at an average annual rate of 5.4 percent between 2002 and 2011 -- a period including the 2008 global financial crisis. Much of the credit for this goes to strong domestic demand. Yet the country has started to see its gross domestic product (GDP) growth slowing down in the wake of this promising performance. The government slashed its 2012 growth forecast to 3.2 percent from an earlier 4 percent -- which still represents a soft landing from the preceding year. Turkish GDP grew 2.9 percent in the second quarter over the same months of 2011, according to official data.

Observers anticipate a strong rebound in the five years to come. But will Turkey be able to maintain its resilience against external shocks? Observers say yes.

Turkish Exporters Assembly (TİM) President Mehmet Büyükekşi tells Sunday's Zaman that Turkey is likely to continue its sustainable growth in the medium run. "Turkey displayed a successful economic performance this year. Its success in realizing a soft landing, minimizing its current account deficit [CAD] as well as increasing exports were the main factors that led to a controlled slowdown," he explains. Büyükekşi believes a recovery in foreign investor confidence in Turkey and Fitch's upgrade would boost exports even more next year. He cites improvements in research and development (R&D) and encouraging exporters to branch out into new markets as factors that will help maintain stable growth. Turkish Confederation of Businessmen and Industrialists (TUSKON) Chairman Rızanur Meral told Sunday's Zaman in a phone interview that similar moves to upgrade Turkey's credit note will help boost FDI to the country, thus strengthening and realizing a sustainable goal, adding that "this will also help us reach budget targets." While the Foreign Policy report finds aspirations to enter the EU a less popular theme among Turks nowadays, Meral says Turkey should maintain strong trade ties with the EU despite stagnation.

Sinan Ülgen, the chairman of the İstanbul-based Center for Economics and Foreign Policy Studies (EDAM) joins Büyükekşi in stating that the Turkish economy realized a controlled slowdown. In reference to the Fitch Ratings upgrade, he says, "Both a balanced fiscal budget and Turkey's banking sector are the main factors that caused the upgrade in Turkey's credit note." However, he has some reservations. Ülgen says Turkey needs to maintain a strong economic performance and not simply rely on upgrades by foreign agencies. "Although the Fitch upgrade is a prominent sign in the international market, we need to be aware of the fact that we are still at the bottom of the investment list."

In an expected rebound from this year's slowdown, the Turkish government expects the country's economy to grow by an average of 5.2 percent per year between 2012 and 2017, more than two times faster than the average growth anticipated for Organization for Economic Cooperation and Development (OECD) members. This is a clear indication that the country's leaders have faith in its potential to continue to stand out with promising growth despite problems with major trade partners. (Cihan/Sundays Zaman) CİHAN
Last Modified: 2012-11-11 18:00:01
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