By Zeynep Sener
Turkey is hoping that the prospect of 5% annual growth and ratings upgrades in Turkish sovereign debt will attract foreign investment.
The country suffered its own version of the recent global financial crisis in 2001. This forced it to reduce government debt and reform the banking sector in the early part of the decade, and spared it from as severe a downturn as other countries when the worldwide recession hit in 2008. Turkey has been making a steady recovery.
The Organization for Economic Co-operation and Development, or OECD, said in a report in late May that the Turkish economy “rebounded sharply since the second quarter of 2009 thanks to good export performance and GDP [is] projected to expand by 6.8% in 2010 and 4.5% in 2011.”
In line with the confident outlook, rating agencies have upgraded their ratings of Turkish sovereign debt over the last six months. The debt is currently rated BB by Standard & Poor’s with a positive outlook. Some commentators expect Turkish debt to be rated investment grade by 2011.
Turkish GDP more than tripled between 2002 and 2008, from US$231 billion (2002) to US$742 billion (2008). Turkey was the 15th largest economy in the world in 2008 and the sixth largest economy in the 27-country European Union.
Unemployment remains a persistent problem, but no worse than in some of the larger European economies. It is 17% currently in urban areas and 27% for young urban workers.
High direct foreign direct investment is a key element in the strong GDP numbers being reported. By the end of 2009, the Turkish Treasury listed more than 23,000 companies with foreign capital in Turkey. The most visible growth in foreign investment has been in the electricity, gas and water supply sector, according to the latest monthly foreign investment bulletin by the Turkish Treasury, as shown in table 1.
Companies in Holland, the United States, Germany, Britain and the Arab countries have been the major investors. Inbound investment slowed noticeably in 2008 and 2009, in keeping with the slowdown in the global economy, and had yet to record in the first three months of 2010. US inbound investment increased six fold from 2006 to 2007 before the recession hit in 2008 as shown in table 2 on this page.