Turkey’s growth rate, for the second quarter of 2014, has slowed to 2.1% which is not only way below the double digit growth rates at the beginning of the decade but also shy of the government’s own target of 4%.
This is a worrying slow-down, and with rising unemployment and inflation, may well have serious consequences, not just for the economy but also on the political landscape, with general elections due in 2015. For this year the growth target is 4%, but it seems that it will not be so easy because the domestic demand has decreased.
Internally, high interest rates and a fall in the value of the Turkish Lira have meant a decline in demand for housing, domestic appliances, and cars. The low growth has also been reflected in increased unemployment officially standing at 9.9%. But analysts claim the figure is much higher, as it only includes those actively looking for work.
The recession in Europe and the increasing geopolitical turbulence in the Iraq and Syria have been among external reasons for the sharp drop in the country’s growth. The rise of ISIL terrorist group has dealt a major blow to Turkish businessmen who have seen their exports to Iraq fall by more than two-thirds.
And the construction and energy sectors have particularly been hit the hardest. Estimates of these losses range between $3bn and $8.5bn. Only a few months ago, hundreds of trucks used to cross the border daily into Iraq but now the number has largely dried up. Much of the political success of the AKP government over the last decade or so has been built on its economic achievements and an expanding economy. However, as the economy begins to falter and inflation and unemployment rise, the political consequences could be far-reaching.