Not just Institutions: what is behind the change in the tra-jectory of the Turkish economy growth in the second decade of the XXI century

Abstract

The article analyzes the factors of Turkey's economic growth slowdown since the beginning of the second decade of the XXI century. And although most often unfavorable trends in the development of the institutional environment are focused on, the reduction in the volume of external financing is probably no less significant. The latter circumstance led to a certain decrease in the rate of investment and noticeable reduction in the level of private consumption. The slowdown of growth rate can also be considered as a result of Turkey’s start sliding into the "middle income trap". The factor that pre-viously provided growth but is much exhausted by today is not cheap labor force as in many other countries, but easy coming external financing. Its decrease caused a reduction in private consumption below the level that until recently prevented sliding into the "trap". As for the main reasons of external sources shortage investors' distrust of financial stabilization in Turkey due to the lack of the necessary institutions, in particular this one to control the level of the budget deficit and state interference in the operation of market mechanisms, as well as the imprudent, sometimes provocative President Erdogan’s foreign policy should be mentioned. Thus, the slow-down in the Turkish economy is based on a shortage of external capital in-flow, caused in turn by institutional factors. The latter circumstance makes the process of immersion "into the trap" formally reversible. Still there is a question about the productivity of returning to Turkey’s previous model ofeconomic development.