Question

Turkey is a surprising addition to the list of rapidly developing economies; with a GDP increase of 8.5% in the year 2011 alone. However, such rapid growth leaves worries regarding possible side-effects. For instance, in 2011 Turkey's rate of inflation was well above that of its peers. Secondly, there is increasing concern regarding Turkey's growing dependency on foreign capital. A large portion of the Turkish banking system is part-owned by banks within the Eurozone. As the single currency falters, such a dependency raises questions about the stability of Turkish growth.

Turkish banks are part owned by European banks as this provides greater economic links with the Eurozone, helping their ascension into the European Union.
A.True
B.Probably True
C.More Information Required
D.Probably False
E.False

Answer 1

Turkey's growing dependency on foreign capital is a concern for the stability of its economic growth. If the exchange rate value of the Turkish lira depreciates, it will be difficult for Turkey's banks to repay international loans denominated in U.S. dollars or euros.

Step-by-step explanation:

Turkey's growing dependency on foreign capital raises concerns about the stability of its economic growth. A large portion of the Turkish banking system is part-owned by banks within the Eurozone. As the euro faltered, Turkey's reliance on foreign capital became more risky. If the exchange rate value of the Turkish lira depreciates, it will become difficult for Turkey's banks to repay international loans that are denominated in U.S. dollars or euros.