A Breakdown of Turkey?s Economic Debacle
Economist Michel Santi shares his views about the importance of maintaining a balanced approach in fiscal policies.
The post A Breakdown of Turkey’s Economic Debacle appeared first on LUXUO.
The Middle Eastern nation has gotten itself lost in grandiose real estate projects that have turned out to be barely profitable. Instead of progressing its economy by prioritising and banking on the traditional route ? which is enticing for foreign investors, a path that is characterised by gradual industrialisation ? Turkey has preferred to enrich the powerful construction sector that is itself financed by banks. This artificial monetary creation ? artificial because it is based on an unproductive sector ? nevertheless allowed the upper echelons of the public and executive administration to butter up their electoral base, to establish a business elite indebted to them, and finally to consolidate their power and influence over the Turkish state.
As always, the structural weakness in this kind of arrangement is that the country in question finances its investments with foreign capital by way of high interest rates. Such capital is very quick to take flight as soon as the cost of money falls, or when political instability manifests itself. The prosperity of the Turkish economy at the start of the 2000s was in fact due to its addiction to foreign capital that led to an overvaluation of its currency, the lira. Invested mainly in sectors of low growth like real estate and not en...
The post A Breakdown of Turkey’s Economic Debacle appeared first on LUXUO.
The Middle Eastern nation has gotten itself lost in grandiose real estate projects that have turned out to be barely profitable. Instead of progressing its economy by prioritising and banking on the traditional route ? which is enticing for foreign investors, a path that is characterised by gradual industrialisation ? Turkey has preferred to enrich the powerful construction sector that is itself financed by banks. This artificial monetary creation ? artificial because it is based on an unproductive sector ? nevertheless allowed the upper echelons of the public and executive administration to butter up their electoral base, to establish a business elite indebted to them, and finally to consolidate their power and influence over the Turkish state.
As always, the structural weakness in this kind of arrangement is that the country in question finances its investments with foreign capital by way of high interest rates. Such capital is very quick to take flight as soon as the cost of money falls, or when political instability manifests itself. The prosperity of the Turkish economy at the start of the 2000s was in fact due to its addiction to foreign capital that led to an overvaluation of its currency, the lira. Invested mainly in sectors of low growth like real estate and not en...
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