Turkish economy’s problems ‘still come from inside,’ says leading economist

ISTANBUL

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Leading economist Daron Acemoğlu said in an interview with Turkish daily Cumhuriyet that Turkey’s economic problems still come from inside, adding high liquidity in global markets helped Turkey overcome the 2001 and 2008 economic crises but the situation has now changed. 

“The Turkish economy’s risks still come from inside. There are of course global risks, but several domestic structural problems constitute the largest risk for Turkey. If we can manage judicial reforms and overcome political uncertainties, an expected foreign shock will barely affect the country. Unless these steps are taken, such a shock will affect us in a very adverse way,” said Acemoğlu, a Turkish economist of Armenian descent living in the U.S. and a Massachusetts Institute of Technology professor, after a C-20 meeting in Istanbul, as quoted by daily Cumhuriyet.  

He noted Turkey was able to overcome the 2001 and 2008 crises relatively easier thanks to high liquidity in global markets. 

“The existence of high liquidity helped Turkey to overcome these crises, but the high liquidity party is now over. The U.S. Federal Reserve [Fed] will gradually tighten its monetary policy. When the high liquidity party is over, Turkey may not have a chance to recover easily,” he said. 

Acemoğlu noted a gradual rate hike by the Fed will be healthier for the American economy, but will lead to further fluctuations in emerging markets, including Turkey and Brazil. 

He noted there has been deterioration in several segments in Turkey, mainly in civil society development and media freedoms. 

Acemoğlu said the recently announced growth figure for Turkey at 3.8 percent in the second quarter was mainly based on the rise in consumer demand and public spending. 

Acemoğlu had also said the end of the Kurdish peace process would have disastrous effects on Turkey’s political system and economy, in another interview with the Anadolu Agency in August. 

“The peace process should continue in Turkey. The end of this process will be a disaster for both the political system and economy of the country. Additionally, the existence of the Islamic State of Iraq and the Levant [ISIL] is a big problem for Turkey and the whole region,” he had said then, adding a number of changes and structural reforms needed to be made to strengthen the Turkish economy’s base.