TURKEY

RISK RATING
High
Default High Risk Score 7.00
Normal Average 4.02
Weighted Average 3.07
RISK RATING HISTORY
RISK RATING SCALE

Risk Rating Scale

Severe: 8.0 to 10
High: 6.0 to 7.9
Elevated: 4.0 to 5.9
Moderate: 2.0 to 3.9
Low: 0.0 to 1.9
EXCHANGE RATE
Country Outlook

Turkey’s increasingly assertive use of military hard power in western Asia and Africa is aimed at bolstering President Recep Tayyip Erdoğan’s political standing and dominance at home. Turkey has made decisive interferences from Syria, Iraq, and the southern Caucasus, to Libya and Somalia. This stance has placed the country at loggerheads with other regional powers such as Russia and Europe, which disputes Turkey’s oil and gas exploration activities in the Eastern Mediterranean. Erdoğan, who has dominated Turkish politics for almost two decades, has based his political supremacy on an ideology of Neo-Ottomanism, suppression of dissent, and a cult of personality. However, mounting economic problems including a massive current account deficit, depleted foreign exchange reserves, and a currency in freefall are undermining the president’s support base and causing divisions in the ruling party.

  • Nationalist and pro-Islamic activism is being leveraged to offset the government’s falling support over a struggling Turkish economy. Following an attempted military coup in 2016 and a subsequent widespread purge of government critics, Turkey established an executive presidency in 2017, which has benefitted Erdoğan. However, the Turkish currency and debt crisis of 2018 caused a significant decline in his popularity. At the 2019 local elections the governing AKP party lost control of Ankara and Istanbul to the opposition Republican People’s Party (CHP) for the first time in 15 years. The AKP’s political dominance remains based on rural communities and is propped up by an alliance with the far-right Nationalist Movement Party (MHP) since 2017.
  • Opposition demonstrations in cities, counter-protests by government supporters, and violent police repression pose the primary security risks in Turkey. Kurdish separatist Partiya Karkerên Kurdistan (PKK) affiliate armed groups pose a threat of attack in eastern Turkish cities, targeting mainly the security forces. Islamic State militants pose decreasing risk of terrorist attacks on cities and strategic infrastructure. As ISIS’s reach has faded, the threat of improvised explosive device and shooting attacks is more subdued. Kurdish militants in Syria pose a threat of reprisal attacks on Turkish border towns, although armed incursions are unlikely. A dispute with the European Union over Turkey’s oil and gas exploration activities in the Eastern Mediterranean is unlikely to trigger armed conflict given the existence of a NATO alliance deconfliction mechanism.
  • Turkey’s economic crisis is fast becoming unmanageable. The decision to start using up huge quantities of foreign currency to avoid raising interest rates have depleted forex reserves, which are in deeply negative territory, with some estimates putting them at minus USD 50 billion by late 2020. The gaping deficit is thanks largely to a failed currency intervention that has cost an estimated USD 140 billion over the past two years. A reshuffle of the central bank governor and finance minister in late 2020 have raised hopes for a new economic growth strategy based on low inflation, stability, and international investment. Yet massive corruption, partisan distribution of resources, and wasteful spending, particularly on grand infrastructure projects, remain major threats to economic stability into 2021.
CUMULATIVE AND DAILY COVID-19 INFECTIONS AND DEATH RATE
INTERNATIONAL MONETARY FUND | DATAMAPPER
Risk Perils
Political Instability
2.0
Expropriation, Nationalisation, Confiscation & Deprivation
2.2
Contract Frustration & Breach
2.5
Taxation
3.5
Bribery & Corruption
4.0
Regulatory Burden
4.0
Strikes, Riots & Civil Commotion
4.0
Security
4.5
Sovereign Default
7.0
Economic Volatiliy
6.5

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