Turkey Defence and Security Report Q3 2009

the back of record low capacity utilisation in December, we now believe that Turkey will experience a full-year economic contraction in 2009. We have revised down this year’s real GDP growth forecast to -3.3%, with a marked contraction in fixed capital investments and private consumption weighing on headline growth. As was the case with Turkey’s other recessions over the past two decades, we expect a recovery to positive growth in subsequent years. That said, we caution that with the external climate likely to remain weak, the recovery will be mitigated, with growth of 1.7% in 2010 and an average of 5.0% between 2011 and 2013.

Political risks continue in Turkey through 2009, and will likely be exacerbated by this ongoing economic downturn. Rising unemployment continues to be a challenge to political stability, and will likely drive public protests, demonstrations and strikes in the near future, further eroding public support for the government. As popular pressures on the government elevate, the risks to policy continuity will commensurately increase. In addition, Turkey’s support of the US and its amicable relations with Israel continues to create tensions and sour relations between Turkey and neighbouring Muslim countries such as Iran. Turkey also has ongoing conflict with the Kurdish militant network, the Kurdistan Workers’ Party (PKK)/Kongra-Gel. In recent months, some 2,500 Kurdish fighters are reported to have returned to Turkey from where they were based in northern Iraq. While not extensively equipped, the PKK has demonstrated its ability to launch periodic attacks against the Turkish authorities.

Turkey is one of the world’s largest arms importers and has the second-largest armed forces in the North Atlantic Treaty Organization (NATO). The size of its army and arms expenditures is unlikely to change in the near future. However, Turkey’s defence budget and number of troops are likely to fall in the coming years, due to the combined effects of a weakened economy, EU pressures and shifts in the nature of threats to the country. The country’s defence industry is small, but is likely to grow and improve. Its export industry is also likely to increase over time as local design and production sees competitive products developed.

This quarter, we have introduced a significant new aspect to BMI’s Defence reports, which is the City Terrorism Rating (CTR). This assesses the risk of a terrorist attack. The CTR takes into account the overall BMI Terrorism Rating for the country in question. It also incorporates the ‘prevalence’ of terrorism, which recognises the frequency of attacks, and whether the city is a target for terrorists. The CTR also recognises the ‘threat’ of terrorism in terms of the likely numbers of victims and the ability of groups to launch sustained campaigns. In Turkey we assess the CTR for Istanbul. At an overall CTR of 45.0, Istanbul has the lowest rating in the Central and Eastern European (CEE) region, indicating the ongoing risks of terrorist attacks in the country.