Robin Brooks Warns: Turkey’s Economic Model Under Erdoğan Is Unsustainable

Summary:

Economist Robin Brooks argues that Turkey has fallen into a repeating cycle of credit-fuelled booms and currency crises under President Recep Tayyip Erdoğan. Comparing Turkey to Argentina, Brooks says the country continually “watches the same movie,” using the banking system to drive short-term growth at the cost of long-term stability. He concludes that Turkey will only regain macroeconomic balance once Erdoğan exits the political stage.

A Recurring Crisis Pattern

Turkey, much like Argentina, has developed a habit of returning to the same policy mistakes, according to Robin Brooks. In Argentina, every major currency crisis ends with the peso being effectively re-pegged to the dollar, laying the groundwork for the next collapse.

Brooks argues Turkey’s mechanism is similar. For more than a decade, Erdoğan has relied on the domestic banking system to orchestrate one credit boom after another. These waves of cheap lending inflate consumption, overheat demand and push the economy far beyond what he calls its “speed limit.”

The political payoff is clear: elevated growth helps consolidate Erdoğan’s power. But the macroeconomic cost is equally clear: recurring currency crises, external imbalances and rising fragility.

A Growth Path That Looked Too Good to Be True

Brooks highlights the divergence in Turkey’s growth path after 2010. Until that year, Turkey’s real per-capita GDP tracked closely with other major middle-income emerging markets such as Argentina, Brazil and Mexico.

Afterward, Turkey took off. For a decade, its per-capita income grew at a pace approaching China’s.

Brooks’ assessment is blunt: this was not the result of structural transformation, productivity gains or export competitiveness. It was the result of aggressive and repeated credit expansion, which artificially boosted household consumption and investment.

The downside was immediate and lasting. Turkey’s imports surged, and the country became structurally dependent on large current account deficits, making it highly sensitive to swings in global sentiment.

“The Scale of the Credit Booms Is Insane”

Brooks points to a chart showing a 13-week centred moving average of bank lending broken down by local-currency and hard-currency credit, and by state-owned versus private banks. The data reveals that what once looked like unprecedented credit surges in 2017–2018 now appear modest compared to the credit flood taking place today.

One of Brooks’ most striking methodological choices is examining nominal lira-denominated credit, rather than adjusting for inflation. Most economists would deflate the credit stock given Turkey’s persistent double-digit inflation. Brooks argues this would be misleading.

Because the lira is heavily managed against the dollar, he says lira-denominated credit has real, immediate purchasing power in the form of imports. Adjusting for inflation would mask the true macroeconomic impact of the credit surge on external balances.

Political Polarisation and Credit as a Survival Tool

Turkey’s deep political divisions are central to Brooks’ argument. Erdoğan’s survival strategy, he says, depends on keeping growth elevated—and the only remaining tool to achieve that is credit expansion.

The result is a policy environment where Turkey cannot break its boom-bust cycle. As soon as global risk appetite dips, or as domestic political tensions flare—such as when Erdoğan arrests an opposition figure—the lira collapses.

According to Brooks, this vulnerability is structural, not incidental. By tying growth to bank-driven credit injections, Turkey has created a system that is inherently prone to crashes triggered by political or external shocks.

“Stability Will Only Return After Erdoğan Leaves”

Brooks concludes that Turkey’s macroeconomic stabilisation is impossible under the current political configuration.

Erdoğan’s model—defined by low interest rates, politically directed credit, high external deficits and short-term growth maximisation—cannot be reconciled with lasting price stability or currency confidence. Any attempt at reform is constrained by political imperatives.

Brooks argues that Turkey’s economy will continue to oscillate between rapid credit booms and sharp currency crises until a new political model emerges.

“Turkey will only regain macroeconomic stability once Erdoğan finally leaves the political stage,” he writes.

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