THE EFFECTS OF THE GLOBAL ECONOMIC CRISIS ON TURKEY’S ECONOMY AND THE RECENT TILT IN HER INTERNATIONAL RELATIONS

Abstract

Turkey was one of the worst hit countries from the global crisis that started in September 2008. She had relied heavily on external financing by charging a high interest take. Her external debt and current account deficit had risen and the lira had become overvalued. Following the global crisis, the fall in the flow of financial funds, direct private investments (DPIs) as well as exports caused a great fall in her GNP. But though refusing to make a stand-by agreement with the IMF, she managed to relief relatively fast; gradually lowering the interest rate. As detailed statistics attest, before the years ‘90s and the onset of globalization her international economic relations had already started to diversify; with the share of Middle Eastern Islamic countries and Russia rising. After the 2008 global crisis economic problems in many EU member countries put further brakes on the EU. Hence, Turkey was obliged to further diversify her exports, imports, inflow of financial flows, DPIs as well as her outflows; the latter including her construction undertakings. Therefore, much of the recent tilt in Turkey’s international economic relations can be considered an outcome of the globalization process, plus the recent global crisis, necessitated by economic factors. Yet many of the recent political moves that the Turkish government has made does not fit to the picture as an economic contingency. Major cases in point are Turkey’s over-reactionary hostiles toward Israel, over-support of Hamas and also of Iran plus the stackening of political reforms, hence membership negotiations with the EU. It is hard to explain all these excesses with plain economic contingencies. Evaluations vary; some foreign observers explain it as an effort by the Turkish government to act as a regional power, others put the major blame of the cooling relations between Turkey and the EU. Still others may see it as a real political tilt towards more radical Muslim countries as well as emerging nonWestern powers. This is less a subject for economic research but one for political economy.