Lack of appetite in investments persists in Turkey

Turkey's economy has been slowing down for the last four years, although there was some recovery in 2015. 

The 2015 GDP data, which was announced at the end of March, has shown that the contribution of investments to the economic growth of 4 percent was around one-fourth, equaling 0.9 percent. This figure is comparatively welcome as the 2014 figure was negative. While the contribution of investments was again one-fourth of GDP growth in 2013, the figure was again negative in 2012. How the economic growth can be accelerated again will be one of the main issues challenging the Turkish economy in the near future.

Growth and investments

Household consumption spending and investments constitute the two pillars of economic growth. In Turkey, the former now plays a bigger role, although the latter was the main source of GDP growth between 2003 and 2007, when Turkey welcomed a huge influx of foreign capital. In those years, a massive foreign capital inflow in the form of FDI, stock exchange investments and foreign loans boosted domestic demand, and Turkey's economic growth duly hit 7 percent. 

This investment spending provided 3 percentage points to the 7 percent in GDP growth during this "dolce vita" period. It means that almost 43 percent of the growth was fueled by investments. 

During the 2008-2009 global economic crisis, the Turkish economy shrank, and the country saw an outflow of foreign capital, just like many other countries. Both the foreign exchange rates and interest rates skyrocketed, cooling down investments and loosening expectations. 

By the end of 2009, foreign investors had started to return to Turkey's stock exchanges, lowering the forex and interest rates. This enabled domestic demand and...