most damaging economic crisis in the
last 15 years. Sparked by the downgrading in mid-January of Turkey's
international credit rating by two US credit rating agencies, the
crisis stems from two years of loose fiscal and monetary policies that
have exacerbated inflation and allowed the public debt, money supply,
and current account deficit to explode. Under Prime Minister CILLER,
Ankara has followed seriously flawed policies that have destroyed
public confidence in the government's ability to manage the economy.
Inflation is now running at an annual rate of 107% and the public
sector deficit is equivalent to 16% of GDP. Turkish firms have been
hurt by high interest rates and a dramatic drop in consumer demand.
Three Turkish banks have folded and the stock market has fallen 48%
since the beginning of the year. Economic growth may drop to between
0% and 2% in 1994, compared to 7.3% in 1993. Moreover, the government
is facing a severe cash crunch. In March 1994, the treasury came close
to defaulting on a loan, and official foreign currency reserves are
equal to less than two months' worth of imports. 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 the tourism industry have
cut tourist revenues, which account for about 3% of GDP, while
economic activity in southeastern Turkey, where most of the violence
occurs, has dropped considerably. To cope with the economic crisis and
instill domestic and international investor confidence in the fragile
coalition government, CILLER has asked the IMF to endorse a
stabilization package she introduced in early April 1994. Negotiations
are underway for a standby agreement, which would give Turkey access
to $450 million this year and enable her cash-starved government to
return to the foreign capital markets.
National product:
GDP - purchasing power equivalent - $312.4 billion (1993)
National product real growth rate:
7.3% (1993)
National product per capita:
$5,100 (1993)
Inflation rate (consumer prices):
65% (1993)
Unemployment rate:
12.2% (1993)
Budget:
revenues:
$36.5 billion
expenditures:
$47.6 billion, including capital expenditures of $5 billion (1994)
Exports:
$14.9 billion (f.o.b., 1992)
commodities:
manufactured products 72%, foodstuffs 23%, mining products 4