Economic challenges await Erdogan's Turkey

Turkish stocks rose on Monday morning following Recep Tayyip Erdogan's victory in Turkey's presidential election.

Economic challenges await Erdogan's Turkey

World Bulletin / News Desk

Turkish stocks rose on Monday morning following Prime Minister Recep Tayyip Erdogan's victory in the presidential election.

Borsa Istanbul's BIST-100 index was up at the opening session on Monday after Turkish voters elected Recep Tayyip Erdogan as president on Sunday. In effect, the Borsa Istanbul index of shares, Turkey's main stock exchange, climbed by 1.55 percent on Monday morning, indicating a positive reaction from the markets.

The benchmark index increased 1,227.78 points and it opened at 80,427.19.

Halil Karaveli, a Senior Fellow at the Central Asia-Caucasus Institute and the Silk Road Studies Program, which are affiliated with the School of Advanced International Studies at Johns Hopkins University and the Institute for Security and Development Policy, said 'Voters have kept (Erdogan) and his party, the Justice and Development Party (AKP), in office because the economic benefits the party has brought have outweighed other considerations.'

'For example, waves of international capital during the last decade have led to booms in public and private consumption and construction. These have kept the Turkish economy growing.,' he added.

Quoting Rahmi Koc, the honorary chairman of Koc Holding, however, Karaveli argued that this growth was not stable. 'The most important structural problem Turkey faces is its excessive reliance on foreign capital inflows,' Koc said.

Income levels have ceased to rise, and economic growth based on consumption and construction is usually not sustainable in the long run. In short, Turkey has become stuck in the classic middle-income trap. And the way out is well known: increase productivity, which requires a better educated population; encourage innovation, which requires a free intellectual atmosphere; and increase female participation in the workforce,' Karaveli argued.

Erdogan was elected Sunday securing 51.96 percent of the vote, according to unofficial counts. Without giving the exact numbers, the Supreme Election Board confirmed late Sunday that Erdogan had won outright, making a scheduled Aug. 24 run-off election unnecessary.

The victory consolidates Erdogan's hold on power after a 12-year tenure as prime minister. Erdogan will succeed Abdullah Gul to the presidency on August 28. He will be Turkey's head of state for the next 5 years.


Güncelleme Tarihi: 11 Ağustos 2014, 14:00