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Turkey Defence and Security Report Q3 2010
Business Monitor International, June 2010, Pages: 88
Turkey Defence and Security Report provides industry professionals and strategists, corporate analysts, defence and security associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Turkey's defence and security industry.
Turkey’s foreign policy orientation is expected to continue to shift away from traditional alliances with the EU and US and toward enhancing relations with new partners to the east and south of the country. For the time being, we do not see this as mutually exclusive from Ankara’s existing strategic objectives and obligations: namely to join the EU and membership in NATO. That said, over the long run, especially should the Justice and Development Party government renew its mandate in 2011, we caution that this could signal the beginning of a more pronounced geo-strategic shift. While this will provide benefits in the form of diversified foreign trade and investment, it will also elevate political uncertainty and potentially accentuate domestic social divisions.
We expect Turkey to maintain recent trends of army and arms expenditure as one of the world’s largest arms importers. The country has the second-largest armed forces in NATO. However, Turkey’s defence budget and number of troops will probably fall in the coming years with a weaker economy and a changing risk profile.
Underlying socio-ideological divisions will continue to pose serious challenges to political stability in Turkey for the foreseeable future. Sporadic crises on the back of ructions between the Justice and Development Party (AKP) government and secularist institutions, including the military and the judiciary, should be expected. We stress though, that with the government maintaining a plurality of public support, that the likelihood of a permanent policy reversal or a military coup as seen in the 1980s and 1990s is limited.
We stand by our core view that Turkey will experience a healthy macroeconomic recovery in 2010, emerging as a major outperformer in Central and Eastern Europe (CEE). That said, we caution that looming rate hikes, weak demand from the eurozone and fiscal austerity measures will weigh on economic expansion. As such, we maintain that Turkish real GDP growth will not return to pre-recession levels, rising back to 3.7% in 2010 and further to 4.5% in 2011.
The macroeconomic recovery in Turkey is expected to gain pace through H110, alongside sharp increases in industrial production and domestic lending growth. The Turkish banking sector is well positioned to expand consumer credit, which will push private consumption and capital investments significantly higher in 2010, while the export sector should be lifted by improvements in global demand.
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