Why is Turkey ‘s economy doing so well?

Gross domestic product for the country grew by 5.1 per cent in the second quarter, slightly below expectations but still far exceeding growth rates in developed countries.

The government’s consumer confidence index showed an improvement from 63.4 at the end of 2016 to above 70 for much of the year, though it dipped again in September to below 70.

That is from Javier Espinosa at the FT.

Compared to 2015, the Turkish stock market is up about 20 percent.  I recall being pilloried when I wrote my very first Bloomberg column in July 2016: “Turkey’s economy isn’t likely to be affected much by the military uprising.”

Macro phenomena can be difficult to understand, but at least along this dimension Turkey has yet to see its comeuppance.


May be because its trains run on time?

Oil. Turkey imports almost all of its petroleum, and so long-term declines in the oil price have a major stimulative effect on its economy.

As does India. Hardly any benefit there.

If Mexico can have 10% economic growth during a civil war, nothing the Turkish economy can do during a mere coup is impressive.

Was there really an attempt at a "coup" ?

Yes? https://en.wikipedia.org/wiki/2016_Turkish_coup_d%27%C3%A9tat_attempt

A new topic, "Why was America's economy doing so poorly until January 2017?" . . .

The belief that centrally planned economies could bring about an economic surge was part of the thinking that drove the rise of fascism, communism, and WWII. - A recovery for Germany, a desperate attempt at catching up and so not being left behind for Italy and Russia. I'm not entirely sure what the current economic historians think of that view. Have they have been looking at it in the context of China? (Or maybe that is not historical enough.) As something of an aside and in a more specific context, today @Pseudoerasmus has blogged '.. Labour repression & the Indo-Japanese divergence.' https://pseudoerasmus.com/2017/10/02/ijd/ ..

Has liberal democracy lost favor among economists? Cowen often expresses admiration for China, a country with high levels of both economic growth and repression of individual rights. Indeed, some of Cowen's self-identified libertarian friends don't seem troubled by the prospect of an authoritarian regime (libertarian for me but not for thee?). While western liberal democracies seem stuck in secular stagnation, not so with China and its very large and robust public sector. Of course, Hayek et al. believed that a large public sector is incompatible with individual rights and that repression of individual rights is incompatible with robust economic growth. Are we witnessing a shift among the acolytes of Hayek et al.? What was up is now down?

The right began with an acceptance of authoritarianism in others, and that opened the door to it within themselves.

That is true. Luckily there is more to the right than that. There is, for example, the legacy of the Smithies - Humean - Burkean tradition. (The far left cannot point to such a pedigree; it is tenuous to say that Mill belongs to them, though Lenin, Castro, Chavez etc. do.)

But more to the point, Anony, who is it now that is accepting authoritarianism? It is the campus left. I'm old enough to say "big deal", except that these really are the leaders of tomorrow. They will get employed in the mid and lower tiers of various government bureaucracies, where we can only hope they become more moderate as the years pass.

I am in a dark mood today, but I will try to button that up.

Here is where any claim that the right really wanted better education falls down:


They (you?) rejected Obama's call for free speech because it didn't fit the narrative.

As usual, Obama's actions were opposite hus words

ugh. His words

Nope. You all left an opportunity for bipartisan agreement lying there, because it was more important to maintain a lie of left unity.

Trukey isn't a centrally planned economy.

It does have a government commitment to large public works projects (bridges, tunnels, big new presidential palaces, etc), and it also has a large influx of immigrants (well, Syrian refugees).

China is also not centrally planned. It is much closer to being centrally planned than Trukey, but it is a mixed economy with a technocratic dictatorship controlling politics.

>“Turkey’s economy isn’t likely to be affected much by the military uprising.”

Likely? Much?

I really doubt you were pilloried for saying something utterly vague and non-committal.

" I recall being pilloried when I wrote my very first Bloomberg column in July 2016: "

Not on this site you weren't.


So much hate in these comments. Be nice folks.

It is a pretty dark day. We wake to continued acceptance of mass killings (as long as they are lone wolf white men with NRA approved gear), and we have absolute confirmation that the Republican "war" on government debt was one big stinking pile of bullshit.

What are we even good at, other than lying to ourselves?

You are a disgrace here with this comment. We are not accepting this. Currently there's not even a clear motive, though it is interesting that his father was labelled a psychopath.

And the leap you make from lone wolves with NRA gear to gov't debt is absurdly tenuous. Say what?


Since all disease has been eradicated, sure, let them branch out into crime.

The common thread in America today is self-deception. We pretend that we care about facts on gun violence or facts on tax policy, but that is all.

We let a stain of a President lead us into "take a knee" la la land while we leave every serious issue a smoking ruin.

You seem to have deceived yourself in any number of ways, so I guess you fit right in.

Cite it if you got it, otherwise you are the problem. I got cites. Government bans gun violence research, government deletes its own economic research when it is inconvenient to the administration.


"common thread in America today is self-deception"

Stunning lack of self-awareness

Got a cite, TMC?

Cite (cite) you're bloody well right
You got the bloody cite to say?

Up above you want the center of disease control to 'study' crime, just so you might get a study that you like.

He's not wrong about the NRA though. Why did that asshole have 17 guns? Why are automatic conversion kits legal?

I am not wrong about the debt either.


But on gun fetishists, we were verging on legalizing silencers. Why? Because they are cool or fun? What a whack nation.


Governments are fans of debt all over the world, not just Reps. Guns are a nutball US outlier.

There is a special hypocrisy though. How many who toed the line that debt was bad 2008-2016 just unabashedly toe the line now, that Trump's debt plan is good?

How many who dislike debt are willing to quietly accept it, muffle themselves, because party first?

Oh no doubt there's hypocrisy, but both sides do it. Frankly anything the other side does is bad, but if your side does it it's good. Very few fixed principles these days in our polarized age.

False equivalence is the devil's plaything.

And certainly another root of American dysfunction. God, 2016 one long example.

Not every equivalence is false though.

You didn't even bother to name an "it" in "both sides do 'it'"

That goes beyond false. Empty equivalence?

Yes I did, you're just doing your tetchy argumentative thing. Pro tip, no one here buys it. Oh sorry, "it" meaning no one buys your bs.

What, where?

"Oh no doubt there’s hypocrisy, but both sides do it. Frankly anything the other side does is bad, but if your side does it it’s good. Very few fixed principles these days in our polarized age."

This is not about me, this is an important American dysfunction. It is an assumption that "both sides" are "equally bad" as a general principle.

It is an excellent way to check out and take no civic responsibility.

Why did we get Trump?

"What difference does it make, they are all the same."

Man I can't be your brain for you but this once, here you go: "it" refers to hypocrisy, in the sense that in a polarized era both sides often are hypocritical. Each side bashes the other for stuff their side does when they are in charge. This is politics 101. A little cynical, but so is reality.

Now, you may continue to claim that only Reps are hypocrites, Dems aren't. That would be wrong, but we all have the right to be wrong on the internet.

LOL no we got Trump because of a myriad of things that have been dissected endlessly: Comey, Hillary, emails, Russians, opioids, culture war, celebrity, fake news, on and on. Take your pick.

We did not get Trump because Dems are so great and Reps are so evil. You aren't cut out for moderation it seems.

I did not claim the left was free from hypocrisy, but I am saying it doesn't balance "for free."

When they block CDC studies or economic reports you DON'T get to say "ah well, both sides do it" without naming an "it" that compares

Otherwise you are just greasing the slide to hell, because nothing is off limits, anything would just be done by the other side, if they had a chance.

The basic thing msgking is selling is that any concrete thing the right does wrong is balanced by an abstract thing the left might do, in a hypothetical space.

This is his version of "moderation." Everything is equally wrong in theory, therefore practice.

You're the only poster here incapable of seeing anything the left does in practice as wrong. OK maybe you and mulp. Also, I'm not 'selling' anything.

That is easy to test. Name a thing the left does wrong, and see if I defend it.

Note that Obama and I already support campus free speech.

Anony, I'd actually look at the stuff you cite if you weren't the most partisan person visiting this blog.

Correction, I often do look... I just have to grit my teeth to do it.

We certainly need to think outside the box on guns. Because banning them ain't going to happen. And background checks would not have stopped this maniac. (Besides, he could have rented a ban a'la the ISIS inspired maniacs.)

Silencers and suppressors look cool but don't work well, contrary to pop culture fantasies. (Except perhaps on a .22, a small and pretty already quiet handgun favoured by some hitmen [hitpeople?].) Yes, auto conversion kits should be banned.

Trivia: I read recently that there have been about 3 gun crimes committed with fully auto (machine) guns since, I can't recall, WWII?

Here is the truth:

I have taken the political compass tests. I am dead center in outlook.

I attack the right because they are in charge and fucking up right now.

In a true counterfactual, where the left was in charge and trying for actual-not-fake socialism, I would be facing the other way.

Why am I going off?

In good part because the White House pulled the "now is not the time" line.



If you had followed this blog for a while, you would have seen that msgkings has a history of being an outspoken anti Trumper, so much that I asked him whether he is one of the black mask/handkerchief dudes in anti trump rallies.

msgkings may not like Trump, but he has a nihilistic streak as well. So much so, that at times the two seem to balance.

Moderation/complacency/cynicism/equanimity do not equal nihilism. Just because my hair isn't on fire every day doesn't mean I believe in nothing. You won't understand this Anonymous, but hysterics never do.

All equivalences are false. Some equivalences are useful.

Can't you all admit that you are ALL cuckolds?!

What does your therapist think of your obsession?

"Gross domestic product for the country grew by 5.1 per cent in the second quarter, slightly below expectations but still far exceeding growth rates in developed countries."

Developed countries usually have slower growth rates. Turkey is a developed country? Its GDP per capita ($21,000) is well below that of Malaysia ($27,000) and about equal to Uruguay ($21,600).




It was a bump on the road. Since President Temer was inaugurated, the stocks have broke all records and production has recovered. GDP and employment, lagging indicators, have started to perform well. All in all, Brazil's recovery is strong, the fundamentals are healthy and the State of the Union is very good. This year's Christmas is predicted to be the best in the latest five years for the stores. The deficit issue is being addressed and the reforms are working. Thanks to President Temer, Brazil's Ship of State has avoided the rocks of perdition and the next year's election will take place amidst a state of prosperity, peace and goodwill.

A lot of Turks seem to think the stats are being manipulated. Particularly inflation, which is probably underreported by half. Erdogan, to cement his power, is pushing the limit of the Phillip Curve to juice as much growth as possible.

On 6 Oct 2017 inflation in Turkey is being reported at 11 percent. Accurate or no, tends to undercut Tyler’s claims that all an economy really needs is an authoritarian tyrant.

War is good for business as long as the war isn't bombing business or shooting management and owners.

It's not really surprising if you keep up with local media. Whatever Erdogan's flaws, his government is strongly committed to growth, development and expanding trade ties. The ending of Russia's sanctions has also helped. The country has a fair amount of ambitious people who are keen to get educated, work hard and do well.

Hopefully tensions with Kurdistan won't result in a hit war.

*hot war

Came to this a bit late. Assuming there is a genuine question here...

The main reason is the Credit Guarantee Fund. The government has made huge sums available to banks, promising to underwrite the first 7% (IIRC) of losses for new SME lending (which is somewhat fungible with personal loans given the family-owned business structures).

That has boosted lending growth rates to *40%* year-on-year. Kind of hard not to boom given that credit growth, although it's wearing off now. It was a clever, if not admirable, policy and expect to see it used as a tool to generate growth by other desperate governments in future.

Add to that inventory restocking and postponed investment and consumer demand coming through after the post-coup purge and referendum. Plus a touch more explicit fiscal spend. Plus an influx of Syrian refugees who have been surprisingly integrated into the workforce and have brought in EU aid money. Plus a stonger European economy pulling on exports a bit.

Good times, for a while.

Turkey can afford the credit guarantee fund because its fiscal situation is in good shape. They could afford to do it again, but the banking system funding is the big constraint (Loan-deposit ratio 145%!). Specifically, the banks attract huge USD and EUR funding which looks long-term but they use short term swaps to create Lira liquidity. So the real Lira funding is even more stretched than it looks.

With its persistent current account deficit, liquidity, balance of payments and the whole external monetary situation is the real Achilles' heel for Turkey, as it historically has been. That's the imbalance that hurts Turkey.

Higher global interest rates, higher oil prices, faster import demand from a overheating economy, a pullback from the European banks funding the Turkish banks... all these things could make it look very different very fast.

Very knowledgeable information. Thanks. A quick note: cannot the government using in time cleverlyCredit Guarantee Fund a clever method to solve the lira liquidity issue? In my opinion they can handle it as well?

Well the government and/or the central bank can create more lira liquidity in various ways (the central bank is somewhat independent but only until the government decides otherwise). Although a credit guarantee doesn't do that directly and wouldn't be the tool you would choose.

But if they do boost liquidity, the lira will be weaker and inflation will rise. Those providing market liquidity will demand higher interest rates and/or restrict the volume of funding available. That acts as a natural brake on the economy and can even lead to a liquidity squeeze, which is a periodic hazard for Turkey and a major reason you get these boom/bust cycles.

Turkey is very vulnerable to this dynamic due to its large current account deficit - it needs to import huge amounts of capital every year, and so it generally needs to provide attractive real interest rates to suck it in.

That's a particular concern at points where you already have a large stock of wholesale funding from abroad with lower than normal maturities and larger than normal currency mismatches, as you do now.

Turkey is a long way from being the most economically vulnerable in its history, but the economic model is the most stretched since the ruling AK party made all those achievements stabilising Turkey in its early terms.

A late response, but the most informative. Thanks.

I was reading some paper by this Solow fellow. Apparently, according to his research, countries with lower levels of labor productivity such as Turkey tend to grow faster. Astonishing isn't it?

Comments for this post are closed