{"id":74989,"date":"2025-02-08T03:50:10","date_gmt":"2025-02-08T03:50:10","guid":{"rendered":"https:\/\/peraltafinancing.com\/business\/finance\/turkey-bridging-ambition-and-reality\/"},"modified":"2025-02-08T03:50:10","modified_gmt":"2025-02-08T03:50:10","slug":"turkey-bridging-ambition-and-reality","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=74989","title":{"rendered":"Turkey: Bridging Ambition And Reality"},"content":{"rendered":"<p> <br \/>\n<br \/><span class=\"wp-block-paragraph\"><\/p>\n<p>President Recep Tayyip Erdogan\u2019s ambitious dreams include building Turkey from \u201cregional economic centre into global economic powerhouse\u201d and boosting it from the world\u2019s sixteenth largest economy into the top 10.<\/p>\n<p><\/span><\/p>\n<p><span class=\"wp-block-paragraph\"><\/p>\n<p>In the shorter term, the bi-continental country\u2019s much-vaunted Twelfth Development Plan (2024 to 2028) aims to improve its \u201cinternational stature, fostering prosperity and combating inflation whilst maintaining strong and sustainable public finances.\u201d That goal will depend partly on the success of an associated Foreign Direct Investment Strategy aimed at significantly boosting FDI across the board. The goal is for Turkey to account for 1.5% of global FDI and 12% of regional FDI by 2028.<\/p>\n<p><\/span><\/p>\n<p><span class=\"wp-block-paragraph\"><\/p>\n<p>As 2025 gets underway, how well is it all going?<\/p>\n<p><\/span><\/p>\n<p><span class=\"wp-block-paragraph\"><\/p>\n<p>If FDI is the main yardstick, not so well.<\/p>\n<p><\/span><\/p>\n<p><span class=\"wp-block-paragraph\"><\/p>\n<p>Full-year figures for 2024 have yet to be released, but will probably be close to the previous year\u2019s level of $10.6 billion, down from $13.7 billion in 2022, a far cry from the 2007 peak of $22 billion, and shy of the $14 billion hoped for earlier. That\u2019s less than 1% of GDP, against 3% in 2007 and well below both potential and policymakers\u2019 hopes.<\/p>\n<p><\/span><\/p>\n<p><span class=\"wp-block-paragraph\"><\/p>\n<p>\u201cForeign investors don\u2019t like inflation at 85%,\u201d the rate in October 2022, \u201cand they don\u2019t much like it at 47%,\u201d the rate in November 2024, says Charlie Robertson, head of macro strategy at FIM Partners, an investment fund based in the United Arab Emirates. \u201cPersistent inflation has held back FDI in Turkey.\u201d<\/p>\n<p><\/span><\/p>\n<p><span class=\"wp-block-heading\"><\/p>\n<h2 class=\"wp-block-heading\" id=\"h-inflation-and-fiscal-challenges\">Inflation And Fiscal Challenges<\/h2>\n<p><\/span><\/p>\n<p><span class=\"wp-block-paragraph\"><\/p>\n<p>Turkish policymakers succeeded in restoring some stability to the nation\u2019s economy by driving down inflation with restrictive monetary and fiscal policies, albeit with a hit to the government\u2019s popularity.<\/p>\n<p><\/span><\/p>\n<p><span class=\"wp-block-paragraph\"><\/p>\n<p>Local elections last March gave the ruling Justice and Development Party (AK) just 35% of the vote against 52% in national elections the previous year; Erdogan\u2019s party now trails the opposition Republican People\u2019s Party (CHP) in current polls.<\/p>\n<p><\/span><\/p>\n<div class=\"wp-block-columns is-layout-flex wp-container-core-columns-is-layout-2 wp-block-columns-is-layout-flex\">\n<div class=\"wp-block-column is-layout-flow wp-block-column-is-layout-flow\" style=\"flex-basis:33.33%\">\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"918\" src=\"https:\/\/s44650.pcdn.co\/wp-content\/uploads\/2025\/02\/Rafik_Selim-1024x918.jpg\" alt=\"\" class=\"wp-image-69952\" \/><figcaption class=\"wp-element-caption\"><strong><em>Selim, EBRD: Many factors that underlie Turkey\u2019s potential also put it at risk.<\/em><\/strong><\/figcaption><\/figure>\n<\/div>\n<div class=\"wp-block-column is-layout-flow wp-block-column-is-layout-flow\" style=\"flex-basis:66.66%\"><span class=\"wp-block-paragraph\"><\/p>\n<p>\u201cIn the months since June 2023, when a new policy team led by Finance Minister Mehmet Simsek, Vice President Cevdet Yilmaz, and the Central Bank of Turkey (CBT) performed a sharp turnaround from unorthodox policies, there have been many positive steps toward rational policymaking,\u201d says Rafik Selim, lead economist for Turkey at the European Bank for Reconstruction and Development (EBRD). \u201cHowever, challenges have appeared along the way.\u201d<\/p>\n<p><\/span><\/p>\n<p><span class=\"wp-block-paragraph\"><\/p>\n<p>The EBRD expects Turkey to post a GDP gain for 2024 of 2.7%, rising to 3% in 2025. Private consumption will be the biggest loser as policymakers focus on raising export-led growth above the current low ratio of 20% of GDP.<\/p>\n<p><\/span><\/p>\n<p><span class=\"wp-block-paragraph\"><\/p>\n<p>Reducing spending remains difficult, however. The 2023 fiscal deficit was 5.2%, and the 2024 level is expected to be similar despite services cuts and tax rises. The main culprit is earthquake spending. Ankara committed some $30 billion a year to help communities recover from the February 2023 quake that left several million homeless in southern and central Turkey.<\/p>\n<p><\/span><\/div>\n<\/div>\n<p><span class=\"wp-block-paragraph\"><\/p>\n<p>That said, an unprecedented rebuilding of homes and infrastructure should lead to growth.<\/p>\n<p><\/span><\/p>\n<p><span class=\"wp-block-paragraph\"><\/p>\n<p>\u201cWithout the quake, the deficit would be 1.1%, which really isn\u2019t bad,\u201d Selim says, adding that 2024\u2019s estimated deficit of 5% will likely fall to 3.1% this year.<\/p>\n<p><\/span><\/p>\n<p><span class=\"wp-block-heading\"><\/p>\n<h2 class=\"wp-block-heading\" id=\"h-rebalancing-the-economy\">Rebalancing The Economy<\/h2>\n<p><\/span><\/p>\n<p><span class=\"wp-block-paragraph\"><\/p>\n<p>The latest inflation figures are moderately encouraging; 2024 ended with a year-on-year rate of 44%, well below what was expected, thanks mainly to falling food prices.<\/p>\n<p><\/span><\/p>\n<p><span class=\"wp-block-paragraph\"><\/p>\n<p>\u201cDisinflation will likely continue this year, given the CBT\u2019s signal that it will maintain its tight stance despite the start of interest rate cuts, the ongoing real TRY [Turkish lira] appreciation, and improvement in services inflation,\u201d says ING Bank analyst Muhammet Mercan. \u201cWe expect inflation to fall below 30% by the end of 2025.\u201d<\/p>\n<p><\/span><\/p>\n<p><span class=\"wp-block-paragraph\"><\/p>\n<p>The current account deficit has narrowed to around $10 billion from 2023\u2019s high of $60 billion, enabling a rebuilding of foreign exchange reserves that has made Turkey less dependent on external flows.<\/p>\n<p><\/span><\/p>\n<p><span class=\"wp-block-paragraph\"><\/p>\n<p>\u201cCapital flows have been good; every recent bond and sukkuk issue has been three or four times oversubscribed whilst yields have been going down, showing perceptions of risk are falling,\u201d Selim observes.<\/p>\n<p><\/span><\/p>\n<p><span class=\"wp-block-paragraph\"><\/p>\n<p>Ratings agencies approve. Last year, Fitch Ratings upgraded Turkey\u2019s sovereign debt\u2014alongside a clutch of Turkish banks\u2014twice, from B- to B+ in March then to BB- in September, when it became the only country in 2024 up until that point to receive an upgrade from all three ratings agencies.<\/p>\n<p><\/span><\/p>\n<p><span class=\"wp-block-paragraph\"><\/p>\n<p>\u201cIn a sense, we\u2019ve gone back to where we were in 2021, before those unconventional policy methods that led to a dramatic deterioration in the country\u2019s macroeconomy and financial stability prospects,\u201d notes Erich Arispe, senior director and head of Emerging Europe Sovereigns at Fitch Ratings.<\/p>\n<p><\/span><\/p>\n<p><span class=\"wp-block-paragraph\"><\/p>\n<p>Turkey\u2019s slower short-term growth outlook reflects the ongoing rebalancing of the economy, which will take time given sticky inflation, Arispe argues. With no elections this year, falling dollarization, rising forex reserves, and an expected drop in the fiscal deficit as earthquake spending winds down are all encouraging signs.<\/p>\n<p><\/span><\/p>\n<p><span class=\"wp-block-paragraph\"><\/p>\n<p>\u201cTurkey has the capacity to grow,\u201d Arispe says. \u201cWe expect 2.6% in 2025 and 3.5% in 2026, without creating other economic distortions. But this is a multi-year story, with the economy being recalibrated to produce a sustainable higher growth environment\u201d and realize the country\u2019s export and FDI potential.<\/p>\n<p><\/span><\/p>\n<p><span class=\"wp-block-heading\"><\/p>\n<h2 class=\"wp-block-heading\" id=\"h-renewable-energy-and-ev-growth\">Renewable Energy And EV Growth<\/h2>\n<p><\/span><\/p>\n<p><span class=\"wp-block-paragraph\"><\/p>\n<p>A new FDI strategy will prioritize less-developed regions, infrastructure, and renewables, says Ahmet Burak Dagliogku, president of the Republic Investment Office of Turkey.<\/p>\n<p><\/span><\/p>\n<p><span class=\"wp-block-paragraph\"><\/p>\n<p>\u201cThe aim is to attract investments that contribute meaningfully to Turkey\u2019s development goals,\u201d he adds, including \u201cgreen transformation, digitalization, high-value services, and deeper integration into global supply chains.\u201d These priorities \u201cwill help Turkey stay ahead in a competitive global market.\u201d<\/p>\n<p><\/span><\/p>\n<p><span class=\"wp-block-paragraph\"><\/p>\n<p>Chinese electric vehicle manufacturer BYD\u2019s plans to build a $1 billion plant in Turkey is just the sort of encouraging development the government wants since the EV sector is one of the fastest growing in the country. Turkish auto producer TOG has now turned out more than 50,000 vehicles. EVs are expected to account for 30% of total auto sales by the end of this year.<\/p>\n<p><\/span><\/p>\n<p><span class=\"wp-block-paragraph\"><\/p>\n<p>&nbsp;Also worth noting, considering its energy security has always been a concern, is the government\u2019s commitment to renewables. \u201cTurkey will invest more than $100 billion by 2035 to increase its renewable capacity and modernize its infrastructure,\u201d says Dagliogku. \u201cThis extensive investment plan highlights Turkey\u2019s unwavering dedication to achieving its net-zero target while ensuring energy security and economic growth.\u201d<\/p>\n<p><\/span><\/p>\n<p><span class=\"wp-block-paragraph\"><\/p>\n<p>Meanwhile, Turkey has been working closely with the EBRD and other multilateral development lenders. Last year, the EBRD committed about $22 billion, invested across almost 500 projects and trade facilitation lines.<\/p>\n<p><\/span><\/p>\n<p><span class=\"wp-block-paragraph\"><\/p>\n<p>\u201cNo, this isn\u2019t an accident,\u201d says the EBRD\u2019s Selim. \u201cWe and Turkey have big green, digital, inclusion ambitions which are linked and where projects have been growing, to the extent that almost half our portfolio is in sustainable infrastructure. We want to further scale up Turkey\u2019s green energy capacity, and five cities here are now part of our Green Cities program.\u201d The EBRD has also been working with other banks on issues related to green bond issuance and encouraging private-sector Turkish companies to move to a low-carbon pathway.<\/p>\n<p><\/span><\/p>\n<p><span class=\"wp-block-heading\"><\/p>\n<h2 class=\"wp-block-heading\" id=\"h-prospects-for-2025\">Prospects For 2025<\/h2>\n<p><\/span><\/p>\n<p><span class=\"wp-block-paragraph\"><\/p>\n<p>A further promotion to investment grade status by the ratings agencies would be a big step toward realizing Erdogan\u2019s wider 2028 ambitions.<\/p>\n<p><\/span><\/p>\n<p><span class=\"wp-block-paragraph\"><\/p>\n<p>\u201cIf you look back over the last eight or so years, there\u2019s always been something to scare investors and throw things off track,\u201d notes Selim: \u201ca coup attempt, elections, COVID, Russia\u2019s invasion of Ukraine, more elections. Investors are looking for certainty and policy tightness for at least, say, a three-year period. This is key if Turkey is to realize its potential of 4% to 5% annual growth.\u201d<\/p>\n<p><\/span><\/p>\n<p><span class=\"wp-block-paragraph\"><\/p>\n<p>Longer term, that potential is huge, and Turkey\u2019s private sector has a remarkable ability to adapt, Fitch\u2019s Arispe says. However, \u201cit takes time to re-establish macro credibility and for this to sink in with investors,\u201d he warns. Many of the factors that underlie Turkey\u2019s potential also put it at risk, including its geographical location, the possibility of taking an indirect hit from higher US tariffs, and exposure to changes in investor sentiment.<\/p>\n<p><\/span><\/p>\n<p><span class=\"wp-block-paragraph\"><\/p>\n<p>\u201cMany factors are beyond Turkey\u2019s control\u2014and not least the current, highly fluid international outlook,\u201d he notes.&nbsp;<\/p>\n<p><\/span><\/p>\n<p>The post <a href=\"https:\/\/gfmag.com\/country-report\/turkey-gdp-growth-economy-revival\/\">Turkey: Bridging Ambition And Reality<\/a> appeared first on <a href=\"https:\/\/gfmag.com\">Global Finance Magazine<\/a>.<\/p>\n\n","protected":false},"excerpt":{"rendered":"<p>President Recep Tayyip Erdogan\u2019s ambitious dreams include building Turkey from \u201cregional economic centre into global economic powerhouse\u201d and boosting it from the world\u2019s sixteenth largest economy into the top 10. In the shorter term, the bi-continental country\u2019s much-vaunted Twelfth Development Plan (2024 to 2028) aims to improve its \u201cinternational stature, fostering prosperity and combating inflation [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":74990,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[93],"tags":[11133,21841,6970,13222],"dealstore":[],"offerexpiration":[],"class_list":["post-74989","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-ambition","tag-bridging","tag-reality","tag-turkey"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.4 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Turkey: Bridging Ambition And Reality - Som2ny Network<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/fivemor.com\/?p=74989\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Turkey: Bridging Ambition And Reality - Som2ny Network\" \/>\n<meta property=\"og:description\" content=\"President Recep Tayyip Erdogan\u2019s ambitious dreams include building Turkey from \u201cregional economic centre into global economic powerhouse\u201d and boosting it from the world\u2019s sixteenth largest economy into the top 10. 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