The ruling Justice and Development Party (AK party) went into the elections having presided over an unprecedented period of economic growth and stability which helped swing the election in their favour.
|One analyst says voters effectively rewarded the ruling|
party's economic performance [AFP]
Emre Yigit, an analyst at the Istanbul-based brokerage Global Securities, believes the AK party's election win was due to voters effectively rewarding the government's economic performance during the past few years.
He said: "Inflation has dramatically dropped, there's been four years of strong growth, the government almost balanced the budget last year and there's been a major surge in investment."
Turkey's economy has come a long way in the last few years. When the AK party first took office in 2002, Turkey was still reeling from a huge financial crisis.
In 2001, the currency had halved in value, mass lay-offs had hit many businesses and a string of high street banks had gone under.
Inflation had been running in high double digits, while periodically passing over 100 per cent. In 2001, the economy actually shrank too, by around 7.4 per cent.
Now, however, inflation is running at 6.9 per cent, according to figures released in late July, the lowest such number since 1970.
Economic growth has been around seven per cent a year for the last four years while the Turkish currency, the lira, has been revamped, surging to a six-year high against the US dollar after the AK party swept back to power on July 22.
Omer Vardan, vice president of the Muslim businessmen and industrialists' association, MUSIAD told Al Jazeera that improvements in economic growth have been visible since the AK party took office some five years ago.
|You see more roads, more housing and office complexes – from east to west and north to south across the country, you can see the effect"|
He said: "You see more roads, more housing and office complexes – from east to west and north to south across the country, you can see the effect."
Under-pining much of this economic turnaround, many analysts argue, is a combination of good fortune, the right policies and some fundamental shifts in the way the country does business.
Volkan Aytar, programme officer for the Istanbul-based Turkish Economic and Social Studies Foundation (TESEV), told Al Jazeera the AK party shifted away from the old, state dominated economic structure, which depended on nationalised industries and a social welfare system.
He said: "The government – the AKP – would like to take the country further into the free market. Yet elements of the state – the bureaucracy, the military, the high courts and many public sector groups – are quite opposed to this. They want to continue a national economy."
"The AKP comes from a different tradition than that, one that came out of ideas about Islamic businesses and free enterprise."
Many of the Islamic businesses Aytar is referring to are known as "the Anatolian Tigers".
These are small-to-medium sized enterprises from cities in Turkey's Asian heartland – places such as Konya and Kayseri – mostly run by devout Muslims.
Many of these businesses have strengthened their international links to Turkish populations in Germany, Central Asia, the Caucasus and the Middle East over the past few years, creating more trade opportunities.
Vardan, whose organisation represents many of these enterprises, said: "With the fall in exchange rates, these companies could benefit from their goods being cheaper abroad. There was a real potential for expansion."
At the same time, the old state sector was under increasing pressure. The International Monetary Fund (IMF) offered Turkey a bale out package from the 2001 crisis that helped balance the books, yet also demanded the economy be further opened to private business and foreign investors.
This was not popular with the old state elite, with the weak coalition government of the day unable to implement the bale out package.
The AK party's pro-business policies is also encouraging foreign investors to look on Turkey more favourably.
Aytar told Al Jazeera: "The AK party have managed to combine a social conservatism – as a party of Islam – with an economic policy that fully supports globalisation, membership of the European Union, integration with other global economic structures such as the IMF and World Bank."
|AKP's pro-business policies have encouraged|
foreign investors [AFP]
"It's been a winning combination."
The evidence is in the level of foreign direct investment in the country. Before the AK party took office, this ran at a few million dollars a year – a level often despairingly compared with a tiny country such as Andorra.
Turkish economic analysts believe the country is now drawing around $20bn a year in foreign investment.
But many analysts also agree that the AK party's policies had luck on their side, there was a great growth in global liquidity, thanks to the US deficit and Chinese economic growth.
Yigit says Turkey's economy would have come under more pressure had these global conditions not existed.
He hopes Turkey will now move beyond the stage where it is vulnerable to such factors.
The AK party have also begun EU membership talks, a process that is fraught with difficulty, yet which many see as worthwhile whatever the outcome.
Yigit says: "The membership talks mean the country has to adopt international best practices in all areas of its economic and financial life. This is good for everyone."
This has also helped boost confidence across the board in Turkish business, particularly in consumer spending, and encouraged local investments.
Yet the liberalisation of the Turkish market has also meant selling off many traditional state enterprises – often leading to lay-offs – and a shrinking role for the state itself.
Unemployment is still high in Turkey, running at around 10 per cent.
"There has been a wealth gap between rich and poor," says Yigit, "but there is some evidence this is narrowing now. As inflation falls, naturally those who have an income benefit. However, those without income – the unemployed – are still a problem and this hasn't really been addressed yet."
As the new AK party government prepares to take office, most businesses are confident that the process of liberalisation will continue.
Meanwhile, for the Anatolian Tigers, there is also optimism about the future.
"We're looking for more of the same, really," says Vardan.
"That means we'll have a stable government that takes logical decisions. Unless something goes really crazy, I think this is what we will get, too."
Source: Al Jazeera