Abstract:

This book reviews economic policies and performance in Turkey since 2000. Coming out of a severe crisis at the turn of the century and years of coalition governments, the economy stabilized, supported by an IMF program, and recovered rapidly, buoyed by international capital flows. While high interest rates and currency appreciation attracted hot money, the construction sector and consumption growth led the economy in the 2010s. External debt piled up rapidly. The tide turned after 2011 as the ruling Justice and Development Party became overconfident after several election victories, started undoing structural reforms, and shifted from the parliamentary system to a one-person rule in 2018. Turkey has suffered from an insidious decay of institutions and a lack of respect for the rule of law. Unraveling inflation was made worse by the president's interventions in monetary policy by cutting policy interest rates, leaving the economy with even higher inflation and depleted foreign exchange reserves. While some see the recent appointments of the Minister of Finance and the Central Bank governor as credible attempts to return to economic orthodoxy, recovery will likely be arduous if not impossible, under the current political structure.

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