ANKARA, April 22 (Xinhua) -- Experts and businesses have called for structural reforms to lead Turkey out of the current economic recession, which is aggravated by the ongoing Turkey-U.S. row.
Turkey stepped into recession in two consecutive quarters last year, the first such situation after a decade of strong growth. But the path to recovery for the Middle East's largest economy is hampered by high inflation and unemployment.
FIRST RECESSION AFTER STRONG GROWTH
Turkey's gross domestic product (GDP) shrank by 2.4 percent in the fourth quarter of 2018, compared with the 1.6-percent decline in the third quarter, according to official data.
The growth rate stood at 2.6 percent for 2018 GDP overall, much lower than the 7.4 percent in 2017, a turbulent period following the 2016 failed coup and terror attacks in major cities.
Turkey's current account deficit kept widening and inflation skyrocketed to 25 percent in October 2018, the highest in 15 years, before it stabilized at around 20 percent.
Turkish businesses struggled under mounting foreign-denominated debts, as dozens of small and big companies filed for bankruptcy, while the banking sector is faced with multiplied bad loans.
The unemployment rate hit 14.7 percent in January this year, the highest in a decade amid rising competition for jobs in the country which also hosts 3.6 million Syrian refugees.
The Turkish lira has plummeted by about 40 percent since a currency meltdown in mid-2018.
The currency crisis last summer was driven by concerns over the central bank's independence and the friction between Turkey and the Unites States. The meltdown prompted the central bank to sharply raise the interest rate to 24 percent from 17.75 percent in September last year, making borrowing more expensive.
Investors fear a new round of tensions between the two NATO allies which remain at odds over their policies in Syria and Turkey's decision to buy Russian S-400 missile defense systems.
Turkish companies are vulnerable to the declining confidence of foreign investors. The foreign currency deficit was approaching 200 billion U.S. dollars at the end of 2018.
Finance and Treasury Minister Berat Albayrak announced a reform package following local elections on March 31, mainly aiming to recapitalize state banks squeezed by large companies' restructuring debt.
Turkey will inject 4.9 billion dollars into ailing banks to make their balance sheet more resilient as part of the package.
LONGER RECESSION FORECAST
Although Albayrak, also son-in-law of Turkish President Recep Tayyip Erdogan, and other officials have claimed that "the worst is behind" for the recession-hit economy, observers and international institutions fear that Turkey will not see economic recovery before 2020.
In its World Economic Outlook report released on April 9, the International Monetary Fund (IMF) forecasted a 2.5-percent contraction for the Turkish economy in 2019, before returning to positive growth in 2020.
Rating agency Moody's also expected the Turkish economy to perform poorly this year and shrink further by 2 percent.
"Economic contraction in 2019 will further create challenges for the majority of businesses as they will continue to be constrained by either a lack of access to credit or unaffordable credit," it said.
Moody's suggested persistent foreign exchange volatility will weigh more on the confidence of investors and businesses.
STRUCTURAL REFORMS AS ONLY WAY OUT
"I don't think that Turkey is on the road to economic recovery because data shows that industrial output is still low with decreasing consumer confidence," Yalcin Karatepe, an economist of the Ankara University, said in a recent televised interview.
Karatepe underlined the need for adopting an ambitious program and much-awaited structural reforms, not just a stabilization program, to return to economic growth.
Representatives from Turkey's business circle also highlighted the need for structural reforms in order to make the economy more resilient to domestic and exterior vulnerability and risk.
Exporters, industrialists, and representatives of business associations held a meeting after the municipal elections in Istanbul, the nation's economic hub.
Addressing the meeting, Rifat Hisarciklioglu, head of Turkey's Chambers and Commodity Exchanges Union, said the upcoming four-and-half year election-free period is important for achieving Turkey's goals.
"We see this period as an opportunity to get permanent solutions for our structural problems," he was quoted as saying by local media.
Erdogan staunchly defended on Thursday his economic policies, noting that next elections in Turkey will be held in June 2023.
"Certain circles in the Western world are trying to depict our economy as if it has collapsed," he said at an event. "Turkey is standing upright and is strongly continuing on its path."
