In the wake of the devastating global crisis, 2010 was the year in which the Turkish economy began to normalize; economic growth outperformed forecasts and the unemployment rate declined significantly.
The stock market showed an historic performance, particularly following the referendum in September. Car sales rose in December, while the latest economic indicators suggest a decline in inflation. Meanwhile, recent privatizations in energy distribution raised $15.8 billion for the Treasury. Undoubtedly, the best news for the Turkish economy of late was the recently announced decision by ratings agency Fitch to lift Turkey's outlook from “stable” to “positive.”
Turkey, among those nations recovering from the economic crisis with no signs of permanent damage, has attracted attention thanks to its impressive economic indicators. Economic growth has resumed and been maintained for the past four quarters, at a time when European countries are still suffering the impacts of the crisis. Recent figures from the Turkish Statistics Institute (TurkStat) show that the economy grew by 5.5 percent in the third quarter of 2010, making it the second-fastest growing economy in Europe after Sweden.
Positive forecasts for its economy have also raised Turkey’s profile; analysts expect growth of 5 percent on average over the next three years. The country’s considerable potential in terms of consumption seems to be the chief source of this optimism. Based on these considerations, Turkey stands out among its European peers as an attractive nation for investment with a rapidly growing economy.
Ratings continue to improve
Fitch's decision to revise Turkey's outlook to “positive” in November 2010 was received well by markets and business players alike. Fitch affirmed Turkey's rating as BB+. The decision to raise Turkey's rating was based on the country’s strong economic recovery, improvement in public finance and growing confidence in the markets. The move came on the heels of the revision of Turkey's rating from “stable” to “positive” by global rating agency
Moody's the previous month.
Industrial production, considered a key indicator of economic growth, performed better than expected in October 2010 when, according to recent TurkStat data, it was up by 9.8 percent compared to the same period last year and up 13.4 percent on the previous month. The increase in manufacturing industries in the last quarter, including automotive, food, textile and furniture, was 11.3 percent.
Privatization of electricity distribution network
Privatization of 18 zones, encompassing 95 percent of electrical power for domestic use, was completed in early December, netting the Treasury almost $16 billion. In the most recent phase, the İstanbul (Asian side), Toros and Mediterranean distribution zones were privatized, resulting in total revenue of $5 billion.
Car sales up 30 percent
A significant boost was given to car sales, thanks to Turkey’s rapid economic recovery, normalization in loan markets, positive indications that the crisis has been left behind, low interest rates and improved exchange rates for the Turkish lira against the euro. Total sales of automobiles and light commercial vehicles reached 612,544 during the period between January and November 2010, representing a 30.83 percent increase over the same period in 2009.
According to figures from the Automotive Distributors' Association (ODD), car sales were up 181.54 percent in November 2010 compared to the same month in the previous year, while car sales for the January to November 2010 period rose by 31.24 percent, totaling 410,323. The figures suggest that the growth in the Turkish automotive market is similar to the revival seen in other developing markets, including China and India.
Surprising decline in inflation
Inflation figures for November 2010 showed an unexpected drop, falling to 7.29 percent. Having previously been on the rise on the back of increasing food prices, the growing trend in inflation reversed in October, with the decline continuing in November. The reduced inflation rate was attributed to normalization in food prices. Recent inflation figures are consistent with the Central Bank of Turkey’s year-end estimate of 7.5 percent.
Unemployment down to 11.3 percent
Jobless figures also showed signs of improvement; a particularly positive indicator in a country with a youthful and growing population, as Turkey has. Unemployment dropped to 11.3 percent in September 2010, representing a 2.1 percent decline from the previous year’s figure of 13.4 percent. The number of jobless dropped to 2,934,000 during the same period. Unemployment among the young (aged between 15 and 19), however, remains high, at 21.2 percent.