After taking power in 2002, the Justice and Development Party achieved economic growth through its policies of granting funding to the private sector to carry out mega-projects, pumping credit through commercial banks, and attracting foreign investment.
On April 18, 2018, the Turkish President, Recep Tayyip Erdogan, announced that presidential and parliamentary elections would take place earlier than planned on June 24, 2018.
The financial crisis broke out in Turkey for cumulative reasons even before the emergence of the coronavirus pandemic. While the negative effects of the global pandemic will emerge during this summer in Turkey, the pandemic has destroyed government hopes and plans for economic recovery, albeit relatively, this year.
This paper looks into the reasons for the current Turkish lira crisis and the solutions available to the government to overcome it or manage it for a longer period.
The spread of the corona epidemic is expected to affect the Turkish economy in three different areas: first, the global interruption and slowdown of the movement of goods and services which will affect Turkey’s foreign trade; second, the decline in local demand due to the climate of lack of confidence, uncertainty and unemployment; and third, the increasing difficulty in finding and accessing foreign financiers and investors due to the reduced desire globally to invest and take risks.
This paper looks in detail into all three areas, discusses the government support plan announced by president Recep Tayyip Erdogan, and assesses the extent that this support would be capable of dealing with the adverse effects of the crisis. The paper also attempts to draw a picture of Turkey’s economic situation till the end of this year while taking into account the implications of the spread of corona for the world economy.
Turkey is today undergoing significant political turbulence. President Erdogan’s popularity is in decline and the incumbent Justice and Development Party (AKP) appears increasingly vulnerable to
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