This week, in the United States, felt very much like what many children would have described as “Opposite Day”. Here’s why: The U.S. Supreme Court upheld the President of the United States’ “Muslim Travel Ban”, which is already reinforcing an unwelcoming message to those in the MENA region who wish to do business or study in the U.S. This unprecedented travel ban proposed by the current U.S. Administration compounds the difficulty in traveling–meaning business travelers
Good news: Thankfully, Turkey has resumed processing visa applications for American citizens traveling to Turkey for business and tourism. Coincidentally, last month, the Turkish Investment Authority provided an in-depth presentation about U.S.-Turkish trade relations. Below are the highlights from their presentation to University of Chicago’s Booth Business students and alumni.
Turkey’s Economic Health Post Global Financial Crisis
It’s funny: Just how the U.S. is imposing travel restrictions while Turkey is proceeding in the opposite direction by lifting restrictions, Turkey’s economy went in the opposite direction of the U.S. when the Global Financial Crisis in 2008 hit.
Currently, Turkey boasts the 13th largest economy in the world. In 2016, Turkey produced 2 trillion dollars in GDP as it grew 5.6 percent in average annual GDP growth, each year since 2o03. Turkey grew higher than neighboring Hungary (1.1%), Romania (3.5%), and Poland (3.8%). Given the 2008 Financial Crisis that severely hit European Union (EU) countries, like Iceland and Greece, Turkey remained resilient.
Rather, Turkey tripled its income per capita: increasing from $3,581 in 2002 to $10,883 in 2016. As a result, Turkey’s about 20 million from the lower class (those earning annual income between $5,000 to $10,000) expanded the middle class from 17.8 million to 40 million. Turkey touts these accomplishments since only seven other countries, with populations of 50 million or more, have exceeded $10,000 in income per capita. The growth of disposable income among Turkey’s middle class shows almost 250 percent growth in automobile ownership between 2002 to 2016.
Check out the Turkish Investment Authority’s site for more data points on Turkey’s economic statistics and timeline of major labor, investment, and tax reforms.
However, two challenges facing Turkey’s economy are: 1) low current account deficit; and 2) low savings. Note: The Turkish lira has fallen more than 10 percent against the dollar and euro in the past three months alone. Inflation stands at 11.9 percent–the highest in nine years.
Turkey entered into a Customs Union with the EU and Free Trade Agreements with 27 countries as it provides access to the Middle East & North Africa (MENA) markets. Due to these market access points, Turkey is the production base for the Nestle company’s sales to MENA. Because Turkey is a production center for leather, clothing, and textiles, the Hugo Boss company’s largest production facility is in Turkey. Now, Tesla is considering installing chargers in Turkey as the middle-income country is getting ready to produce its first domestic car.
Economic Growth Encourages More Dialogue
Finally, despite Turkey’s wish to increase economic ties with the United States and encourage US investment, Turkey’s leadership remains steadfast in asserting certain principles–specifically: discouraging the US from breaking from global norms and officially recognizing Jerusalem as the capital of Israel. According to Turkish Spokesman to President Erdogan, “such a move would undermine all peace efforts and trigger new tensions and conflicts.”
But there are also political-economic developments on the U.S.-Turkish front. Turkey is also following the U.S. trial of Turkish banker, Mehmet Hakan Atilla, who is accused of helping Iran evade U.S. sanctions and flood the currency market with Irani oil revenue. As the case continues in the U.S. judicial system, we see how the accused’s bank, Halbank, is restating its transparency policies:
Whatever the verdict will be for Mehmet, it may be more interesting to see how other Turkish banks respond in order to safeguard Turkey’s investment climate. Dialogue between the U.S. and Turkey is there, but the impetus for increased economic ties depends on the President Erdogan’s response to ’45’.