The Economic Impact of Globalization on Turkey
Introduction
Globalization has affected the world in many different ways, including cultural exchange, language development, and information diffusion, along with worldwide economic and financial growth. Here we wish to analyse the costs and benefits of globalisation to the Republic of Turkey. More specifically, we will look at the economic and business impacts globalisation has made on Turkey and its current position with regard to the world economy.
Current Economic Situation
Today’s economic outlook for Turkey is deteriorating. GDP growth has been revised to 3.6% for 2008 (against 4.3% previously) and to 3.0% for 2009 (previously 4.0%). Turkey’s unemployment rate rose to 9.4%. The slowdown in growth in 2007 (GDP growth of 4.5%) and 1H08 was mainly due to the deceleration in domestic credit following the rise in domestic interest rate (to dampen an acceleration in inflation).
External financing of the country’s large account deficit is becoming more challenging given the decline in FDI inflows and the global financial turmoil. The macro environment is more challenging for Turkish banks, because of weak economic growth and ongoing financial market volatility. Turkish banks have become better capitalised (at 17.5% at end-June 2008) and less reliant on wholesale funding (13%) since the 2001 crisis. We believe the asset quality deterioration is the main risk for the sector.
The sector has experienced higher default rates in credit cards and consumer loans in 2007 and 1H08. Although most Turkish banks are expecting higher NPLs for year-end 2008 and 2009, we believe that the impact of a sharp deteriorating macro environment in the loan asset quality is underestimated. We have to keep in mind that Turkish banks’ loan books remain untested through a full economic cycle and vulnerable to interest rate hikes.
The impact of the global slowdown on the Turkish economy,
Countercyclical budgetary policy:
In 2007, ahead of presidential and general
Globalization has affected the world in many different ways, including cultural exchange, language development, and information diffusion, along with worldwide economic and financial growth. Here we wish to analyse the costs and benefits of globalisation to the Republic of Turkey. More specifically, we will look at the economic and business impacts globalisation has made on Turkey and its current position with regard to the world economy.
Current Economic Situation
Today’s economic outlook for Turkey is deteriorating. GDP growth has been revised to 3.6% for 2008 (against 4.3% previously) and to 3.0% for 2009 (previously 4.0%). Turkey’s unemployment rate rose to 9.4%. The slowdown in growth in 2007 (GDP growth of 4.5%) and 1H08 was mainly due to the deceleration in domestic credit following the rise in domestic interest rate (to dampen an acceleration in inflation).
External financing of the country’s large account deficit is becoming more challenging given the decline in FDI inflows and the global financial turmoil. The macro environment is more challenging for Turkish banks, because of weak economic growth and ongoing financial market volatility. Turkish banks have become better capitalised (at 17.5% at end-June 2008) and less reliant on wholesale funding (13%) since the 2001 crisis. We believe the asset quality deterioration is the main risk for the sector.
The sector has experienced higher default rates in credit cards and consumer loans in 2007 and 1H08. Although most Turkish banks are expecting higher NPLs for year-end 2008 and 2009, we believe that the impact of a sharp deteriorating macro environment in the loan asset quality is underestimated. We have to keep in mind that Turkish banks’ loan books remain untested through a full economic cycle and vulnerable to interest rate hikes.
The impact of the global slowdown on the Turkish economy,
Countercyclical budgetary policy:
In 2007, ahead of presidential and general
Cited: 1.THE IMPACT OF GLOBALIZATION ON THE TURKISH ECONOMY (May, 2002) Central Bank of the Republic of Turkey 2. Financial Markets and Globalization in Turkey Tulay Arin University of Istanbul, Faculty of Economics 3. Economic Survey of Turkey 2008, Turkey Desk at the OECD Economics Department 4. Turkey 's Evolving Integration into Pan-European Markets, Francis Ng 5. http://www.country-data.com Turkey – Industry (http://www.country-data.com/cgi-bin/query/r-13968.html) 6. Encyclopedia of the Nations - Asia and Oceania –Turkey (http://www.nationsencyclopedia.com/Asia-and-Oceania/Turkey-INDUSTRY.html)