Turkey may look vulnerable to you. When President Erdoğan was elected back in June 2018, you could buy a dollar with 4.71 Lira. Now it costs around 6,25 Lira. This means that the Lira has depreciated by around 33 percent in less than a year against the dollar. Yet there are solid reasons to be optimistic about Turkey. Why?
Turkey is a great country in a very troubled region. A few years back, I remember how surprised I was when an Iraqi official started talking about Turkey as the industrial giant of the region. My mistake at the time. We Turks tend to compare our country with European countries. We often have no idea about the performance of our regional partners.
Yet it is true, Turkey is this region’s industrial giant. That is thanks to the Turkish apertura in the early 1980s, led by President Özal. The share of manufacturing industry exports were around 10 percent back in those days. And more than half of that amount goes to Europe. Turkey and Israel are the only industrial countries of our region, by the way. Just have a look at the numbers.
Exporting manufacturing industry products shows something about the rising competitiveness of the Turkish economy. This jump in global competitiveness of the Turkish economy is highly visible in the economic complexity index calculated by MIT’s Observation of Economic Complexity. The index is based on an analysis of the products in the export basket of a country. You either converge to the product set of richer countries or diverge from it. Countries like Saudi Arabia and Iran are reliant on fossil fuels, so they have pretty boring graphics. Turkey however, has a complex economy, its charts are interesting, more colorful and constantly evolving.
The global competitiveness of the Turkish economy jumped in the 1980s and then in 2000’s. Mark these two periods please. Both happened right after deep economic crises, mind you. Crises always create a reform opportunity for Turks. First it was the oil crisis and then it was public debt pile up exploding bank balance sheets. Both were about fiscal crises of the government. Still, Turkey used these crises to create a jump in its competitiveness by taking the right set of measures as a response to deep economic troubles. That’s how we have learned that taking the right set of measures pays off. Yet note that Turkey moves forward almost always with a good old crisis as necessity is the mother of innovation.
Now the Turkish economy is in deep trouble once more, comparable to the late 1970s and late 1990s (why these things keep happening at the turn of the decade, I don’t know). This time it is not a fiscal crisis of the government, but a crisis of corporate debt. Still, we know the drill: When push comes to shove, Turkey has always done the right thing. That’s why I still feel optimistic about Turkey. This country has always come back from economic disaster. I’m excited to see it happening again.