Question

Explain the economic challenges faced in Turkey. Your answer should be written in three or more complete sentences.

Answer 1

Turkey faces persistent high inflation and repeated sharp depreciation of the lira, which erode households' purchasing power and make imports more expensive. Unorthodox monetary policy—especially prolonged periods of very low interest rates—has weakened confidence in the central bank, encouraged capital outflows, and increased financial market volatility. Large current-account deficits, substantial external borrowing by corporations and banks, and limited foreign-exchange buffers make the economy vulnerable to external shocks and refinancing risks. Structural problems such as relatively low productivity growth, heavy reliance on energy imports, and investor concerns about the institutional and political environment constrain longer-term growth. The combination of these factors has squeezed real incomes, raised unemployment and poverty risks for some groups, and complicated fiscal and social policy choices.