The stated goal of bringing inflation down to 35% and pushing growth to 3% in 2002 is something that is proving quite a challenge to both economists and business people in Türkiye. Consumer inflation has moved above 70% in recent months and tackling the problem is made harder by the task of turning the economy round from last year’s negative growth rate of 9%.

The devaluation of the Turkish Lira has in general helped exporters. Producers of leather garments and accessories exported about $800 million in 2001 and are on target to hit the $1 billion mark by the end of 2002. However, the Lira rallied in December 2001 and January 2002, making exports dearer. Last year’s banking crisis has also meant problems for Turkish exporters seeking credit from international banks or their agents. One fear is that underperforming banks could now easily be acquired by foreign owners, as has already happened in two cases. Foreign firms in other sectors, too, have recently started buying out their Turkish partners.

On the import side, a decrease in imported materials has made the foreign trade balance look healthier, although the deficit still stood at 11% in December 2001. The IMF loans that help keep Türkiye afloat mostly go to repay interest on loans and service debts, adding to concerns about short-termism.

Recent media reports playing down the economic crisis prompted angry responses from many in the private sector who contend that the government cannot spend its way into growth. The country needs to produce and spend to achieve real growth, but the country’s one million unemployed are in no mood to spend. Moreover, tight fiscal policies required to meet the conditions for IMF loans have meant a lack of new investment in most sectors.

Overall, Türkiye is finding it hard to meet the economic targets set for 2002, but has successfully maintained a degree of stability. That in turn could be undermined by unrest in neighbouring Iran or Iraq, bringing to the fore Türkiye’s strategic importance. Some now see IMF loan packages less as an incentive for structural reforms or for membership of the EU, and more as a reward for NATO loyalty. It seems likely that both strategically and economically, Türkiye is likely to remain in the spotlight.