Turkey’s Prime Minister Recep Tayyip Erdogan opened the annual meeting of the European Bank for Reconstruction and Development on Friday with a simple yet familiar message for states of emerging Europe, Eurasia and North Africa: try to be more like Turkey.
By Joe Parkinson
Turkish Prime Minister Recep Tayyip Erdogan gives a speech during the European Bank for Reconstruction and Development 2013 annual meeting and business forum opening session on May 10, 2013, in Istanbul. AFP/Getty Images/Ozan Kose
ISTANBUL—It was the perfect platform for a well-honed pitch.
Turkey’s Prime Minister Recep Tayyip Erdogan opened the annual meeting of the European Bank for Reconstruction and Development on Friday with a simple yet familiar message for states of emerging Europe, Eurasia and North Africa: try to be more like Turkey.
Sandwiched between struggling economies of the euro zone and political turbulence in the Middle East, many of the countries of Central and Eastern Europe are trapped in a cycle of recession or stagnation, with limited ability to attract investment.
That challenge was spotlighted as the EBRD on Friday slashed its 2013 growth forecast for the economies of emerging Europe and North Africa from 3.1% in January to just 2.2%, calling for urgent structural reforms to kick start growth.
Turkey, by contrast, has seen four years of sustained growth, which has transformed the economy into an investment magnet. The Istanbul stock market has this year repeatedly surged to fresh record highs. Benchmark two-year bonds last week dipped under 5% for the first time ever, signaling growing investor confidence in the stability of Turkey’s growth path.
The EBRD’s chief economist Erik Berglof on Friday hailed Turkey for “successfully navigating a soft landing” in 2012 and forecast Turkish growth to pick up to 3.7% this year on the back of rising domestic demand spurred by looser monetary policy. EBRD officials also expect Turkey to win its second investment grade credit rating in the next few months, likely offering a further boon for the economy.
For Prime Minister Erdogan and Deputy Prime Minister Ali Babacan, visionaries of the Justice and Development Party which has won three successive elections in Turkey, Ankara’s emergence from a 2001 banking crisis that skittled many of the country’s top lenders offered an example to other countries still mired in crisis.
“In this challenging time Turkey is a success story – I would like to share with you the secrets of our success, ” Mr. Erdogan said before reeling off a laundry list of reforms to Turkey’s financial sector and real economy that has helped spur growth without upending stability.
Mr. Babacan was more succinct: “People ask how does Turkey achieve these results?… We say that it’s all about stability. If you have confidence and stability, it’s easy, ” he said.
To be sure, even as Ankara has dramatically outperformed many of its regional peers, not everything in the economy is rosy. This year, Turkey has struggled to attract foreign investment for new infrastructure projects, and in 2012 the economy missed an official growth forecast of 4%, clocking in an expansion of just 2.2%, its lowest level since 2009.
Turkey also faces some clear structural problems: a chronic current account deficit financed by fickle international fund managers, and a near-total dependence on imported energy that can stoke both external financing needs and inflation if oil and gas prices rise.
Ankara’s own experience of recovering from its 2001 crisis by borrowing 14% of its gross domestic product from the IMF also stands in contrast to the overriding challenge for the EBRD’s countries of operation: how to stimulate growth.
Nonetheless, Turkey’s economy certainly stands out as a bright spot as emerging Europe economies struggle to propel growth amid continually slack demand for exports in the euro zone. Meanwhile, the development bank’s four new countries of operation — Morocco, Jordan, Egypt and Tunisia — remain buffeted by political instability and legacy of economic inefficiency.
As booming Istanbul plays hosts to this year’s EBRD meeting, most of the region’s laggard economies would gladly trade Turkey’s problems for their own.
via Turkey Sits Proud at EBRD Meeting – Wall Street Journal – WSJ.com.