In order to properly analyze the economic effects of the global crisis on Turkey, it is necessary to touch on the nature and the salient features of the economic structure of the Turkish economy, that had already been facing some serious problems prior to the economic crisis. Problems, which however, have been largely disguised by IMF supported policies that were being implemented in an environment of high global-liquidity. Export/import and growth data indicate as is also true with other countries except PRC, in Turkey too that, the rapid contraction following September 2008 stemmed from the severe declines in aggregate demand in domestic and export markets. Since contractions --albeit at a much lesser rate-- are forecast for 2009 in Turkeys main export-markets, it is reasonable to attempt to trigger an upturn by increasing government expenditures and in particular social-overhead investments on the one hand and by stimulating consumption expenditures on the other. Though this will inevitably result in increases in the public deficit, the domestic debt service ratio and so is likely to jack-up inflationary expectations and/or the nominal interest rates, such undesirable consequences can be effectively addressed in the medium/long run by designing auspicious development and industrialization strategies and by implementing the policies these would call-for.
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