With the economy showing some healthy statistics and a level of confidence in the business community unseen for years, it seems Turks have little reason to worry.

 

Inflation has been plummeting, exports rising and the Turkish Lira strengthening – all unheard of events during much of the last two decades.

 

"There is a very serious healing going on," says Alper Kucukpinar, an analyst with one of Istanbul’s top banks.

 

"From being a country that people saw as a developing economy, we’ve become one that is on the verge of starting European Union accession."

 

On 3 March, the government announced that wholesale price inflation had dipped below 10% for the first time in about 15 years.

 

Just a few years back, in 2001, the country was hit by its worst economic crisis since World War II, with prices jumping by triple digit inflation.

 

Economic upturn

 

"There is a very serious healing going on. From being a country that people saw as a developing economy, we’ve become one that is on the verge of starting European Union accession"

Alper Kucukpinar,
economic analyst

At the time, the Turkish Lira (TL) plummeted – halving in value against the US dollar and most other international currencies.

 

But the TL has now strengthened, up 20% against the dollar, and about 17% overall last year.

 

"On the macro level things are going extremely well," said Ayse Asgin, an analyst for a top Istanbul brokerage. "Many people expect the government to reach beyond its yearly targets this year."

 

After the 2001 crisis, IMF representatives flew in with a package of loans to bolster the economy – yet these were tied to stringent cutbacks in state spending and a strong push to sell off the country’s many state industries.

 

Both proved bitter pills for previous governments to swallow, with little progress made on reorganising the state-dominated economy.

 

That was until the new Justice and Development Party (AKP) took over, giving Turkey its first single party government in 15 years.

 

"The government is doing its best to make sure the IMF programme gets implemented," said Asgin. "This is very important for the markets."

 

Uncertainties

 

However, there are still some concerns.

 

"One question mark is over what happens when the IMF programme – and the IMF loans – run out at the end of this year," said Asgin.

 

"Ordinarily, though this isn’t such a big problem … the IMF is also keen for Turkey to be a success story, as are the US and EU, so I don’t think they’ll push too hard for Turkey to repay these loans if it proves difficult."

 

Debt – and not just to the IMF – has long been a concern of market analysts.

 

Market watchers are edgy over
the Cyprus dispute

Total debt stood at $213.8 billion at the end of January, yet many are now quietly confident on this score too.

 

"The main point about debt,” said Kucukpinar "is that it’s not just about mathematical calculations. The most important thing is that there is a positive perception of the whole economic process – of the country’s ability to meet those debts over time. That is what we have now."

 

Joblessness, however, remains an issue.

 

Unemployment


While industrial production jumped 6.5% in January, according to official figures, and exports saw a massive 32.29% surge between February 2003 and the same month this year, employment figures have not seen the same level of growth.

 

In fact, unemployment even rose slightly in January.

 

"The jobless figures are still high," said Asgin. "But somehow, we don’t see any big problems emerging because of this. There have been no protests against the government on this.

 

"They have cut the numbers of public employees – how they’ve done this isn’t clear because it’s not been very transparent - but they have met the IMF’s requirements on this so far."

 

Now, though, analysts widely predict the Fund will ask for a further round of economic restructuring in its next letter of intent – the plan for the next stage of its programme.

 

"Most likely they will ask the government to do something about the social security system," added Asgin. "The government says it has plans to change this and will discuss them at its next cabinet meeting."

 

The IMF sees the social security system as inefficient and a major drain on public finances.

 

Political situation

 

However, most market watchers are looking elsewhere for future risks. Most of all, they are looking at the international political environment.

 

"In December of this year, the EU will make a decision on whether or not to give Turkey a start date for accession talks," said Erdinc Gurel, a commentator for Hurriyet newspaper.

 

"In December of this year, the EU will make a decision on whether or not to give Turkey a start date for accession talks. This is crucial. If there is no date given, we could even see the Turkish government break off relations with the EU. That would have a major negative effect on the markets"

Erdinc Gurel,
commentator, Hurriyet newspaper

"This is crucial. If there is no date given, we could even see the Turkish government break off relations with the EU. That would have a major negative effect on the markets."

 

Meanwhile, the other political worry is Cyprus.

 

"If Turkey makes concessions and a settlement goes through on Cyprus – with a reunited island joining the EU in May – yet Turkey still gets no date itself for EU accession, then that will be very dangerous for the government," said Asgin.

 

"People may think Cyprus was given away for nothing. It would create a very risky economic and political environment."

 

Much depends on the talks currently underway in Nicosia, and on what European governments decide over the next few months.

 

"Mostly, the noises from Europe are positive these days," said Gurel, "but one never really knows. There are so many EU countries – more by December – and Turkey and its friends will have to convince a lot of people."

 

Istanbul's markets - and many Turks in general - are hoping the country can make a convincing case.