Turkey and the Global Economy
Academic account of the post-2001 reform programme and its unwinding.
Summary
Ziya Onis and Fikret Senses edited this collection on the Turkish economy after the 2001 financial crisis, assessing the reform programme that followed and the growth period under the AK Party government.
The 2001 crisis was severe: the currency collapsed, banks failed, and output fell sharply. The programme that followed, designed with the International Monetary Fund and directed by Kemal Dervis, included banking sector restructuring and recapitalisation, central bank independence and inflation targeting, fiscal consolidation with primary surplus targets, and regulatory reform across several sectors. The contributors assess each area, and the general finding is that the reforms produced macroeconomic stability and a period of strong growth financed substantially by capital inflows.
The volume gives particular attention to the European Union accession process as an external anchor for reform, which the contributors treat as the mechanism that made politically difficult changes possible, and to the question of what happens when that anchor weakens. They also cover the persistent structural problems: the current account deficit and the economy's dependence on external financing, the low domestic savings rate, the informal sector, and regional and income inequality. The book was published in 2009, and the subsequent weakening of the accession process, the accumulation of external debt, the currency crises and the erosion of central bank independence were anticipated in outline by several contributors.
Key takeaways 7
- The 2001 crisis produced banking restructuring, central bank independence and fiscal consolidation that a normal political process would not have delivered.
- European Union accession functioned as an external anchor that made politically difficult reforms possible.
- Turkish growth after 2002 was financed substantially by capital inflows, which made it dependent on external conditions.
- The current account deficit and low domestic savings rate leave the economy structurally reliant on external financing.
- Contributors anticipated that reform would weaken if the accession anchor lost credibility.
- Banking sector recapitalisation after 2001 produced a system that withstood the 2008 crisis without further intervention.
- The informal sector and regional inequality persisted through the growth period rather than being resolved by it.
Who should read it
Investors in Turkey and analysts of external policy anchors who want an assessment of the post-2001 reform programme and its dependencies.
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Where it sits in the reference 2
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