In the club of correspondents, we cross borders to see what is happening elsewhere in the world. Today, focus on Turkey indirectly impacted by the war in Ukraine with foreign investment.
The war in Ukraine has led to a food and economic crisis. Some countries hope to do well or find themselves given a new role. The Correspondents’ Club wonders whether India will become the world’s leading wheat exporter and whether Turkey can attract Western investment.
Turkey wants to attract foreign investment
A privileged intermediary between kyiv and Moscow, the Turkey of President Recep Tayyip Erdogan uses this position to bring about a return to favor with its Western allies but also to promote the assets of its economy to investors. Turkey presents itself as an alternative to Russia, deserted by European and American companies. A thesis that we began to hear as soon as the first sanctions against Russia were announced – at first quite discreetly, and today openly among Turkish leaders and in the media close to power. Recep Tayyip Erdogan even proclaimed that “the doors of his country [were] open” to Western companies that had left Russia because of these sanctions.
Turkey highlights its advantages with its geographical position, its young and qualified workforce, its market of 85 million consumers, its membership of a customs union with the European Union, its industry well integrated into European production chains , or even its increasingly weak currency against the dollar and the euro, which is certainly synonymous with inflation for the Turks but with opportunities for foreign investors.
Turkey hopes to see its Turkish ambitions materialize as it desperately needs foreign direct investment. The latter have been declining since 2015 due to economic and political instability and lack of visibility for investors. Economist Mustafa Sönmez, like many of his colleagues, therefore believes that Turkey will not emerge economically winner from this conflict, on the contrary: “Turkey is losing because of its very extensive integration into the world economy, says Mustafa Sönmez We can even say that it is one of the economies which suffered the most from the war.First, because of its close economic ties with Russia and Ukraine.Secondly, because the war has strengthened the image of vulnerable and high-risk economy that Turkey already had. Its risk premium has increased further, the indicators are bad. All this does not attract foreign investors.”
The economist recalls that for the moment, the war has above all worsened inflation in Turkey – estimated at 61% over one year in March – partly because of the rise in the prices of energy and certain foodstuffs such as wheat, which Turkey imports massively from Russia and Ukraine. Experts also point out that one of the heaviest economic effects of the conflict will not be felt until this summer. Turkey was hoping for up to ten million Russian and Ukrainian tourists to replenish its foreign currency reserves, thus restoring its currency, thus reducing inflation. It now seems obvious that only a small part of them will sunbathe this year on the Turkish Riviera.