2015 was a hard year for the global economy and Turkey, as a key player among emerging markets, was also affected by the volatile business environment around the world.
Political uncertainty emerged after the general election on June 7 and a government was unable to form. Five months afterwards, a snap election was organised and on November 1, the AK Party came to power again as a single party, gaining 49.5 percent of the vote. The five months were not easy and the economy was not the priority for politicians.
Turkey currently hosts the largest number of refugees in the world. President Recep Tayyip Erdogan announced recently that Turkey has spent $9 billion so far to take care of the refugees.
Towards the end of 2015, deteriorating ties between Russia and Turkey raised concerns over the Turkish economy. On November 24, Turkey downed a Russian jet that violated its airspace after issuing it repeated warnings. In retaliation, Russia cut economic ties. Despite all, the Turkish economy grew 4 percent in the third quarter of 2015, increasing growth over 9 months to 3.4 percent.
Turkey was also the host of the G20 this year. Under Turkey’s presidency, leaders of the world’s biggest 19 economies plus the European Union met in the southern city of Antalya. Global economy, terrorism, the deepening refugee crisis and the war in Syria were among the top issues discussed there.
Turkey posts strong growth amid volatile environment
In the June 7 general election, after 13 years in power the governing AK Party failed to win the majority necessary to govern alone. After fruitless coalition talks, a snap election was held on November 1. Owing to the AK Party’s ambitious goals, the Turkish economy has been a rising star among both emerging and developed countries.
Turkey’s economy was the fastest growing in Europe in 2011 and became the second fastest growing economy in the world after China. So markets, businesses and consumers all sought stability.
After five months of having an interim government, whose priority was not the economy, the outcome of the snap elections was in favour of stability. AK Party won the majority with 49.5 percent of the votes.
Despite the political uncertainty, the Turkish economy managed to grow 4 percent in the third quarter of 2015 and exceeded expectations. Thanks to the decline in global energy prices, known as the “soft-spot” of Turkish economy, the current account deficit has been narrowing down since the beginning of this year.
Now the government is focused on structural reforms to boost economic growth. The government announced a list of reforms and this solid step was praised by international investors and credit rating agencies.
Turkey hosts largest number of refugees
Turkish economy has achieved all this despite hosting the largest number of refugees in the world. Turkey is currently hosting 2.5 million Syrian refugees.
A huge amount of Syrians are living in different cities of Turkey, while some are hosted in refugee camps, where the Turkish government is providing them with healthcare and education.
Turkish President Recep Tayyip Erdogan has announced that so far the government has spent $9 billion to take care of refugees. But during AK Party’s 13 years of ruling, Turkey’s nominal GDP tripled to $800 billion. Therefore, the cost of resettling refugees is only about 0.2 percent of Turkey’s GDP.
Deteriorating ties between Turkey and Russia
After repeated warnings, Turkey shot down a Russian warplane that violated its airspace on November 24.
Russia described the incident as an “act of aggression”, but Turkish President Recep Tayyip Erdogan said it was not a hostile act towards Moscow. Erdogan added that “Turkey did not down the Russian plane on purpose. It is nothing but an automatic reaction to a border breach, an exercise of the rules of engagement.” But this was not enough for Russia and in retaliation, the country cut economic ties with Turkey.
President Vladimir Putin approved a raft of economic sanctions including the banning of fruits, vegetables and meat, even though Turkish food supplies became more important to Russia after it banned imports from the West in retaliation to sanctions imposed on it following Moscow’s annexation of Crimea.
Additionally, it asked its citizens not to visit Turkey, indicating that there would be a drop from the 4.5 million Russians who visited Turkey in 2014. Russian Foreign Minister Sergei Lavrov announced that Russia halted the visa-free agreement between Russia and Turkey, which will enter into effect starting January 1, 2016.
Just a few months ago, Erdogan and Putin agreed to triple bilateral trade to 100 billion dollars in the next eight years. Both countries were expected to build a new project to carry gas into Europe with Turkish Stream pipeline. Meanwhile, Turkey also commissioned Russia to build its first nuclear power plant.
It’s a standard tactic for Russia to use its energy supplies as a political weapon during disputes, but so far energy gas and oil supplies remain unaffected.
However, there’s uncertainty over both future energy supplies and the two major joint projects. Experts also believe that while its economy is already suffering due to Western sanctions, Russia cannot afford to lose Turkey, one of it top export partners, which imports 5 percent of its goods. But for Turkey, the situation is different.
The Turkish economy is not expected to be seriously affected by Russian sanctions, because trade has already been falling due to the slowdown in the Russian economy. After the crisis, the Turkish government has been looking into new alternatives for energy imports. Only time will tell whether the political and economic ties between Turkey and Russia will improve.
G20 meeting under Turkey’s presidency
Leaders from the world’s 20 largest economies gathered in Antalya this year, under Turkey’s presidency. The Group of 20 is an international forum for the governments and central bank governors from 19 countries plus the European Union.
These countries are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States and the European Union.
In 2009, the G20 replaced the G8 as the main economic council because the balance of changes in the world's economy. In terms of GDP, members of the G8 used to dominate half of the world economy, but today, China has the second largest economy, while India’s GDP is now larger than Canada’s.
For the first time in its history, the G20’s economic agenda took a backseat to political issues, due to the Paris attacks by DAESH, which occurred only two days before the world leaders met.
The attacks made it more obvious that there are certain global problems that need to be addressed. Besides economy, the deepening refugee crisis, issues of global terrorism and the war in Syria were among the most handled headlines at the summit.
The G20 summit hosted 13,000 officials and 3,000 journalists attended the summit. There were more police officers than delegates and journalists - 13,400 in total.
After the meeting in Antalya, the G20 leaders released a communique and adopted a comprehensive agenda focusing on the future benefits for all. According to leaders, the global economic growth remains "uneven" and falls short of expectations.
They pledged to remain committed to achieving the goal of lifting the collective GDP of the G20 economies by an additional two percent by 2018, an agreement reached in the 2014 summit in Australia's Brisbane. In order to achieve that, the leaders said G20 member economies will continue to monitor the implementation of the commitments and adjust their strategies in accordance with economic conditions.