Published On: Thu, Nov 29th, 2018

What challenges will Turkish economy face in 2019 & suggestions to overcome them?

What challenges will Turkish economy face in 2019 & suggestions to overcome them?

Despite some negative opinions that the world economy could shrink to a certain extent in 2019, most veteran economists and opinion leaders do not expect a major crisis to make the world suffer again like in the past.

To be more precise, although the economic indications from Germany most recently were not very satisfying and caused some concerns regarding growth in the region, experts believe Germany will most likely make up for it and continue to be the driving force behind Euope in 2019 as well.

On the other hand those expecting FED to bring down interest rates in the close future are destined to experience disappointment as this might not be very likely until the end of first half 2019 at least, depending on the developments to come certainly. Therefore the US dollar is expected to maintain its strength against Euro and other currencies.

As for the developments in Asia Pacific region despite reports China has been underperforming recently, this country will no doubt take necessary measures and get on the right track again, as expressed by opinion leaders in economy.

When we look at Turkey on the other hand we see that this country has had to cope with multiple problems to include political and economic ones. It is good to know nevertheless the administration has spent considerable effort to take necessary measures with success as far some of them are concerned.

Among these challenges the fight for the devaluation of TL against dollar was certainly the most important one and the administration seems to have overcome this issue as it looks now. The question “At what cost” is a topic to discuss, certainly.

In fact the Central Bank of Turkey – despite pressure in the other direction from top authority – increased interest rates to a point where the attraction of dollar was not as strong as earlier anymore in the financial markets. Goes without saying this helped together with some other steps such as financial reforms and improvement of reputation in global markets etc. All in all, the dollar / TL rate seems to have come to a good/logical level, now.

However, there are a couple of complications in this picture as well. First, with the increase in interest rates the inflation does not stand a chance of coming down to desired levels – at least for now and secondly if the dollar continues to go down any further this would give Turkey’s exporters a real hard time to go through. In fact it could be a major blow deteriorating balances of the sector.

This point is very important being aware of the fact that the only way out for Turkey is production and exportation. Otherwise all other measures or steps to be taken would be superficial and would not help to recover the economy in the end. Turkey has to make sure that its industry and export sector are running in full steam.

Having said this there are also some good prospects for Turkey. To provide an example, the markets in Asia Pacific region are hungry for consumption. Reports show that this region alone represents 30 percent of the world economy without China and 50 percent with this country. This is a huge opportunity for Turkey’s economy hungry to sell abroad much more, to improve its economic performance. Reports show again that Turkey’s trade share in said markets is somewhere round 0,1 percent which could really be improved substantially.

Having said this, it is not like the whole region is awaiting Turkey with arms wide open as the competition here is one-of-a-kind due to the strong focus of all the global economies. Therefore to make the dream come true factors such as quality, price and other marketing activities like promotion etc. would be vital.

To recap, Turkey’s administration is facing a very difficult task in 2019 and should not lose a minute to get on with putting right measure in practice and make sure manufacturing industry and export sectors are supported to the full to get the economy going again with full stream.

Otherwise real tough times in terms of economy and social dissatisfaction to follow certainly could be awaiting Turkey. To be even worse, some third party could be knocking on the door despite the unwillingness of the government to welcome the newcomer; obviously this could be the IMF which the top authorities running the state would not be very pleased to cooperate with.

All in all, Turkey needs good luck in 2019 but to be more important than that it also needs to take the most necessary steps urgently to protect its economy from further blows.

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