The first direct presidential election in Turkey has shown the challenges in the economy. The leadership has some grave difficulties to triumph over if they want Turkey is to become one of the 10th largest economies in the world by 2023.
What are the Biggest Challenges?
1. Lack Of A Competition
Turkey’s competitiveness in a global marketplace is obstructed by low productivity and high costs, affecting Turkey sourcing. To some degree, this has been backed by depreciation in the currency. This has reduced the price. However, the core issues of low productivity are required to move up the value-added chain.
2. Constant Existing Account Deficit
Political tension in the Middle East and Ukraine lead to a rise in the price of oil. This puts excess pressure on the deficit as Turkey is dependent on imported energy. Besides this, there lies the real problem. The dependence on short-term capital affects the current finances. The temporary cash flows are easily upturned, leaving Turkey in a vulnerable state to investors.
3. Political Uncertainty
Political instability is the third challenge that has affected international aspects Turkey sourcing. The country also faces struggles outside its borders, especially in Iraq and Syria. Iraq has an increased share of its exports, with a considerable percentage of business coming from Turkey. Tensions in these two countries have numerous political and economic impacts.
4. Inflationary Pressures
Inflation is the fourth challenge. In 2013, the annual inflation rate was at 7.5%, and it shot up to 9.3% in July 2014. Despite this, interest rates have been slashed. Price is not helped by the weak currency, making imports expensive than before. Inflation diminishes consumer confidence, swelling up wage demands and wears away savings.
5. An Unfit Labour Market
The fifth challenge is the labour market in Turkey sourcing. In 2013, the country had a large population of working age, but a low percentage is reasonably active. This is due to a couple of factors like less female participation. Secondly, the grey economy is large and many jobs are outside the formal sector. Additionally, youth unemployment is a challenge! Shortages of skills compound these problems, placing Turkey below much lower-income countries like, Peru, China and Philippines.
It is quite clear that Turkey is not achieving its goal of becoming one of the world’s 10 largest economies by 2023. The country does have key advantages that it should be capitalizing on. First is its strategic location on the border with Asia and the EU and Asia, which, if exploited, can lead to potential economic growth through increased trade.
The country’s large and young population is another key advantage and is the second-largest country in Europe. Despite the vital challenges, the country is trying to procure a profitable position in trade and commerce. Turkey’s sourcing is well-favoured by many western countries due to low-cost labour and manufacturing cost. Once the challenges are overcome, the country can fulfill its goal.