Reef the topgallants

6 May 2008 By Martin Hutchinson

Politically and economically, Turkey s position is perilous. It survived a scare in 2006, when markets were liquid. Currently it has balance of payments and budget deficits and inflation is climbing. If debt markets tighten or a political crisis occurs, Turkey will be in trouble.

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The Turkish Constitutional Court is currently considering an indictment seeking to ban the AKP ruling party of president Abdullah Gul and prime minister Recep Erdogan. The charges are that the party has engaged in antisecular activity, by removing the ban on headscarves, the use of which is prescribed under sharia law, and making changes in Articles 10 and 42 of the constitution, damaging its principle of secularism.

Turkey has a budget deficit of 3% of GDP, a payments deficit of 7% of GDP and reported inflation of 9.7% in the year to April 2008. Its foreign debt was $226bn at December 2007, 46% of GDP.

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