Turkey's youth seen as a cushion against uncertainties

Such advantages of the Turkish economy could help the continuation of FDI inflows at a time of an increased perception of political uncertainty and a global credit crunch.

Net FDI inflows to Turkey increased 9.8 percent to $21.87 billion in 2007, up from $19.91 billion in 2006, thanks to the high global liquidity and strong macroeconomic performance following the 2001 crisis. However FDI inflows sharply slowed in 2008 as the global economic conditions deteriorated.

In addition to record FDI inflows European small and medium sized enterprises are now showing increased interest to invest in Turkey, and there has been increased interest from countries such as Austria, Italy and Spain, UniCredit MIB said in a report published this week.     Â

"There are numerous reasons that make Turkey so attractive. The young generation is one of Turkey’s most valuable assets, and is also something that gives the country its dynamism - if Turkey were to join the EU at some stage, it would not only have the largest population but also the youngest population," Simon Quijano-Evans, the research director of UniCredit MIB, told Hurriyet English.

He said that this advantage helps Turkey to reform its social security system gradually rather than having to take drastic measures like most countries in the EU did. The Turkish president had approved a long-delayed social security reform that aims to cut Turkey's huge 30 billion YTL deficit over decades.

Quijano-Evans said another advantage of the Turkish economy is its accessibility to a larger geography. "With the Customs Union, Turkey has access to an EU27 of 480 million people, and countries with a total population of another 310 million people directly or indirectly (Russia and Ukraine), through the sea border with Turkey, providing investors with a huge potential consumer base," he added. He also mentioned energy would be an important sector that foreign investors will invest.

REGIONAL IMBALANCES
The report underlined Turkey's GDP per capita is now higher than Romania and Bulgaria, the most recent members to the European Union, respectively 16 percent and 70 percent after the recent revisions.

Turkey has revised its GDP for 2006 up 31.6 percent to 758 billionYTL ($526 billion), taking the per capita income up to around $7,500 from $5,480. Turkey's GDP rose 12.9 percent to 856 billion YTL ($659 billion) in 2007

However the report showed Turkey's GDP had not been distributed equally among the regions, as the southeastern provinces' GDP is around the 30 percent of the Marmara region. According to UniCredit, 2007 per capita income in the Marmara region is $14,500, while it is $4,500 in eastern Anatolia and $5,200 in southeast Anatolia.

"The lower GDP per capita data in the southeastern part of the country demonstrates the need to invest in infrastructural development in that part of Turkey, while at the same time providing foreign investors with a further incentive to invest there," he added.

The Turkish government had announced a $12.5 billion investment package for southeast Anatolia. Referans business daily reported on Wednesday especially Italian, Saudi Arabian, Israeli, Chinese and French investors are interested in investing in the region as the government is expected to detail its package.

POLITICAL UNCERTAINITIES
However risks remain and the outlook could turn gloomy if the global credit crunch turns out to be far from an end and political uncertainty increases further.

"Political risk is something that every country has to deal with. SMEs obviously need a certain amount of predictability in order to make long term plans that justify the financial risks that they take, which is why they are closely watching developments, while the calming in global market sentiment has also clearly helped, although that can not be counted on, given the increased difficulties that both domestic and international companies will face in rolling over credits," Quijano-Evans added.

Turkey's top court's move to accept the chief prosecutor's appeal to close the ruling AKP over claims of "becoming the focal point of anti-secular activities," and to ban 71 officials from politics, raises political uncertainty in the country. Economists say the impact of the case would be limited if the excess liquidity in global markets had continued.