Despite Prime Minister Erdogan's statements that Turkey is not and will never be hit by the global financial crisis, all economic indicators point that the Turkish economy is officially in a recession. In the first quarter of 2009, Turkish economy has shrunk by a whopping 13.8 percent, making the decline second only to the country's 1945 World War II economy. This is exacerbated by a growing unemployment. According to the Turkish Board of Statistics, youth unemployment rose to 28.6 percent from 21.5 percent since last year. Considering that Turkey's unemployed young population has always been a concern for European countries, these figures have implications beyond Turkey's domestic politics. As we highlighted in our June 24th blog entry, unemployment among the youth is a problem throughout the Middle East.
The government of Erdogan has taken pride in (and credit for) the booming economy, and has repeatedly claimed that the global financial crisis will miss Turkey. Ankara also delayed an IMF deal fearing a public backlash during the municipal elections, although the overall growth rate of GDP has fallen from 4.7 percent in 2007 to 1.1 percent in 2008. We expect to see whether the AKP will go continue hiding its head in the sand or will acknowledge that Turkey is now officially in recession. If Turkey's economic malaise persists, the AKP will be hard-pressed to win another parliamentary commanding majority in 2011.
Ankara needs the EU more than ever now, but ironically the sluggish performance of its economy will further undermine its odds of membership.