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Turkey Economy 1996

    • Overview:
      In early 1995, after an impressive economic performance through most of the 1980s, Turkey continues to suffer through its most damaging economic crisis in the last 15 years. Sparked by the downgrading in January 1994 of Turkey's international credit rating by two US credit rating agencies, the crisis stems from years of loose fiscal and monetary policies that had exacerbated inflation and allowed the public debt, money supply, and current account deficit to explode. In April 1994, Prime Minister CILLER introduced an austerity package aimed at restoring domestic and international confidence in her fragile coalition government. Three months later the IMF endorsed the program, paving the way for a $740 million IMF standby loan. Although the economy showed signs of improvement following the stabilization measures, CILLER has been unable to overcome the political obstacles to tough structural reforms necessary for sustained, longer-term growth. As a consequence, the economy is suffering the worst of both worlds: at the end of 1994, inflation hit a record 126% (annual rate), and real GDP dropped an estimated 5% for the year as a whole, the worst decline in Turkey's post-war history. At the same time, the government missed key 1994 targets stipulated in the IMF agreement: the budget deficit is estimated to have overshot the government's goal by 47%; the total public sector borrowing requirement likely reached 10%-12% of GDP, rather than 8.5% called for in the program; and the Turkish lira's value fell 5% to 7% more than expected. The unprecedented effort by the Kurdistan Workers' Party (PKK) to raise the economic costs of its insurgency against the Turkish state is adding to Turkey's economic problems. Attacks against tourists have jeopardized tourist revenues, which account for about 3% of GDP, while economic activity in southeastern Turkey, where most of the violence occurs, has dropped considerably. Turkish officials are now negotiating a new letter of intent with the IMF that will stipulate more realistic macroeconomic goals for 1995 and allow the release of remaining funds of the standby agreement.

    • National product:
      GDP - purchasing power parity - $305.2 billion (1994 est.)

    • National product real growth rate:
      -5% (1994 est.)

    • National product per capita:
      $4,910 (1994 est.)

    • Inflation rate (consumer prices):
      106% (1994)

    • Unemployment rate:
      12.6% (1994)

    • Budget:

        $28.3 billion

        $33.3 billion, including capital expenditures of $3.2 billion (1995)

    • Exports:
      $15.3 billion (f.o.b., 1993)

        manufactured products 72%, foodstuffs 23%, mining products 4% (1993)

        Germany 24%, Russia 7%, US 7%, UK 6% (1993)

    • Imports:
      $27.6 billion (f.o.b., 1993)

        manufactured products 71%, fuels 14%, foodstuffs 6% (1993)

        Germany 15%, US 11%, Italy 9%, Russia 8% (1993)

    • External debt:
      $66.6 billion (1994)

    • Industrial production:
      growth rate 6.7% (1993); accounts for 26% of GDP

    • Electricity:

        18,710,000 kW

        71 billion kWh

        consumption per capita:
        1,079 kWh (1993)

    • Industries:
      textiles, food processing, mining (coal, chromite, copper, boron), steel, petroleum, construction, lumber, paper

    • Agriculture:
      accounts for 16% of GDP; products - tobacco, cotton, grain, olives, sugar beets, pulses, citrus fruit, variety of animal products; self-sufficient in food most years

    • Illicit drugs:
      major transit route for Southwest Asian heroin and hashish to Western Europe and the US via air, land, and sea routes; major Turkish, Iranian, and other international trafficking organizations operate out of Istanbul; laboratories to convert imported morphine base into heroin are in remote regions of Turkey as well as near Istanbul; government maintains strict controls over areas of legal opium poppy cultivation and output of poppy straw concentrate

    • Economic aid:

        US commitments, including Ex-Im (FY70-89), $2.3 billion; Western (non-US) countries, ODA and OOF bilateral commitments (1970-89), $10.1 billion; OPEC bilateral aid (1979-89), $665 million; Communist countries (1970-89), $4.5 billion

        aid for Persian Gulf war efforts from coalition allies (1991), $4.1 billion; aid pledged for Turkish Defense Fund, $2.5 billion

    • Currency:
      1 Turkish lira (TL) = 100 kurus

    • Exchange rates:
      Turkish liras (TL) per US$1 - 37,444.1 (December 1994), 29,608.7 (1994), 10,984.6 (1993), 6,872.4 (1992), 4,171.8 (1991), 2,608.6 (1990)

    • Fiscal year:
      calendar year

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