Cornelia Meyer

By : Cornelia Meyer

:: A lot has been happening in and around Turkey in the last week. Russian President Vladimir Putin visited Turkey’s Recep Tayyip Erdogan, the government released its mid-term program for the economy (2018-2020) and the Istanbul Finance Summit deliberated the state of the Turkish economy. Meanwhile, next door the Kurdish authorities held a referendum for independence, causing harsh reactions from the Iraqi central government and anxiety among countries with sizable Kurdish minorities, including Turkey.

This is as good a time as any to contemplate the state of the Turkish economy and its geopolitical importance to Europe and its neighboring countries.

The Turkish economy experienced a serious dent due to the policy spat with Russia after the downing of a Russian fighter jet, and after the coup attempt in June 2016. Tourism was down by 31 percent, as was foreign direct investment. Tourism really matters to Turkey, which is grappling with a current account deficit of $32.5 billion — the highest in relation to GDP of any G-20 economy. There are other big structural economic imbalances in terms of employment, inflation, education, credit, et al.

Erdogan was able to repair relations with Russia, which helped economic ties and brought back Russian tourists in droves. Russia is also going ahead with the TurkStream gas pipeline and the Akkuyu nuclear power plant. And the two countries are at least talking on Syria.

Political tensions with Germany have ratcheted up since the 2016 failed coup in Turkey. The cool, calm and collected German leadership has a hard time coming to grips with Erdogan’s fiery rhetoric. His vitriol during the German election did not help, neither did Germany’s refusal to allow Turkish ministers to hold rallies. European countries took a bleak outlook on relations with Turkey because Erdogan arrested tens of thousands of citizens in the aftermath of the failed coup. European leaders are concerned with the human rights situation in the country — so much so that Turkey’s EU accession talks are all but dead for the time being.

Political squabbles may have damaged relations in recent times but the nation’s strategic location, tourism, trade and its role in the refugee crisis prove global leaders should be interested in its economic well-being.

Cornelia Meyer

Europe and Turkey are economically and geopolitically of huge significance to one another. In 2016, 55 percent of Turkish exports went to Europe. Germany provides the second largest number of tourists after Russians and this despite official travel warnings by the German government.

Turkey really matters in terms of geopolitics too — the country lies at the crossroads between Asia, the Middle East and Europe, and hence constitutes the Eastern-most flank of NATO. Five percent of global oil production passes through Turkey from its origins in Russia, Kazakhstan and the Middle East to reach European consumers. Russian and Ukrainian grain finds its markets in Europe and the Middle East after transiting Turkey. Let us not forget the refugee crisis: Europe did a deal with Turkey whereby the country agreed to stem the flow of refugees through its Western borders against payment of €3 billion. The Western Balkans route is now all but closed off, bringing respite to Hungary, Poland, Austria and Germany. Meanwhile, Turkey is housing three million Syrian refugees and is integrating them without much internal debate or resentment.

All of the above goes to show why Europe and Turkey’s other neighboring nations have every interest in a stable and prosperous country. The economy took a big hit after the failed coup, but is on the road to recovery and is growing again. The OECD forecasts an economic growth rate of 3.5 percent for 2017 and 2018, although Turkey’s own numbers are significantly higher. Turkey has become an upper-middle-income country in the past decade and the government hopes the country will cross the upper-income threshold by 2020.

Political squabbles aside, all of Turkey’s neighbors have an interest in an economically prosperous country. Given that you can reach 1.4 billion people within a few hours’ flight from Istanbul, it is safe to conclude the world at large ought to have an interest in Turkey’s economic stability and well-being.

:: Cornelia Meyer is a business consultant, macro-economist and energy expert. Twitter: @MeyerResources

:: Disclaimer: Views expressed by writers in the Column section are their own and do not reflect RiyadhVision’s point-of-view.

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