The political economy of turkey’s economic miracles and crisis

Abstract

This paper argues that Turkey experienced two manufactured economic miracles since 2002 which required a corrective crisis. The first miracle occurred between 2002 and 2008 when Turkey’s GDP tripled. This miracle was fictional since the increase in GDP was largely due to the appreciation of the exchange rate. During this period, Turkey experienced large current account deficits and accumulated large external debt, which are at the heart of the current crisis. Turkey experienced the second miracle between 2009 and 2013 when the economy grew faster than most countries in the world. This miracle was even more peculiar since it was associated with the deterioration of many economic and political indicators. This miracle was fostered by the 2016 revision of the Turkish Statistical Institute and therefore was also fictional. In this period, Turkey continued to experience large current account deficits and the external debt has become large enough to threaten the economy. The deterioration of the global environment marked the end of the second miracle and created the conditions for a painful adjustment. This paper argues that Turkey’s two economic miracles and the current crisis are dialectically linked and the crisis cannot be comprehended without a proper grasp of how the miracles were manufactured.