ANKARA: Turkey’s economy crashed in 2001 in a major crisis that saw stocks plummet, interest rates rise to 3,000 percent and tens of thousands of people left unemployed. The circumstances leading to that crisis bear worrying similarities to trends visible in the country’s economy today.
The dual risks embodied by the current account deficit and foreign trade deficit continue to rise in tandem, and, accompanied by a significant budget shortfall, these have triggered a phase of out-of-control Turkish lira devaluation and rising interest rates that threatens significant harm to Turkey’s economy.
Economy Minister Nihat Zeybekçi’s claim that the reality in Turkey is not reflected by the dollar’s rise against the lira echoes similar statements by the minister who presided over the 2001 crisis, Recep Önal, who called the rising exchange rate “speculative” and said it would soon right itself.
After the economy went on to spectacularly crash that year, the programme for economic renewal laid out by Önal’s replacement, Kemal Derviş, was designed to bring Turkey’s stricken economy in line with International Monetary Fund (IMF) guidelines. Ali Babacan, economy minister for the now ruling Justice and Development Party (AKP), would continue to follow this programme to the letter until 2008.
