Türkiye’s Macroeconomic View 06.2024
Abstract
With the tightening of monetary policy, fiscal measures, and increased taxes, the government aims to reduce inflation and cool down the economy. These measures are intended to stabilize the economy after a period of high inflation and economic volatility. Inflation is expected to get below 10% in 2026. It will be very difficult for businesses to operate and maintain good cash flow over the next two years. Households will also be affected with decreasing purchasing power.
Overview
Türkiye is one of G20 countries with its 1.1 trillion-dollar economy.
Türkiye’s main pillar for growth came from service and manufacturing industry. Government spending is also very important as well and it’s around 50 billion TRY per quarter.
Türkiye is an emerging economy with an average annual growth rate of 5%.
GDP per capita is 14.000 dollar per year. The Gini coefficient is a measure of income inequality. 0 indicates perfect equality, 1 indicates perfect inequality. For Türkiye it is 0,43. A Gini coefficient of 0.43 indicates significant income inequality. According to 2021 Eurostat data, Türkiye is number 1 in 36 Europe countries in terms of income inequality.
In 2021 Türkiye decided to implement heterodox economy policy. Heterodox economics refers to economic theories that diverge from mainstream or neoclassical principles. As a result, inflation rises to 70% in 2022 and 2024.
After the presidential election in 2023, Türkiye change it’s monetary policy and started to increases the interest rate to 50% in order to decrease inflation.
External debt is the money borrowed from foreign countries which includes banks, governments and financial institutions.
According to World Bank Policy Research Working Paper 10475 report on June 2023, global external debt as a share of GDP reached 114% in 2020.
After covid we can see an increase in external debt. But it is still under the world average.
PMI(Purchasing Managers’ Index) is one of the important indices that show the economic activity expectations for the future.
Above 50 is considered as good sign for the country. Türkiye’s PMI is slightly below 50 for the last couple of months. That means future expectation is not so good.
Conclusion
Looking ahead, Turkey’s path to economic recovery and stability hinges on the successful implementation of monetary and fiscal policies designed to curb inflation, reduce external debt, and promote equitable growth. Strategic policy interventions, coupled with robust economic planning, will be essential to navigate the complexities of the current economic landscape and achieve sustainable development. By addressing these multifaceted challenges, Turkey can pave the way for a more stable and prosperous economic future, ensuring the well-being of its businesses and households alike.
