How can NATO’s decision to increase defense spending affect the Turkish economy?

How can NATO’s decision to increase defense spending affect the Turkish economy? NATO leaders have agreed to increase defense spending to 5 percent of their country’s total economic output by 2035. As part of the commitment contained in the final communique of the NATO Summit, which ended on June 25, member states will allocate at least 3.5 percent of gross domestic product (GDP) to basic defense spending over the next decade. Countries will increase their indirect defense expenditures, such as infrastructure, to a maximum of 1.5 percent. Dr. An economist specializing in conflict economics at the Ulster University Business School in Northern Ireland, who answered questions from BBC Turkish. Luqman Saeed says NATO’s 5 percent commitment represents a significant change. Countries such as Spain, Belgium and Slovakia have expressed concern about this change, which requires countries to spend billions of dollars Oct, saying that it will not be easy to achieve the goal. Turkey, on the other hand, made statements in support of the decision. • Did Turkey get what it wanted from the NATO Summit? Ministry of National Defense sources announced that defense expenditures will continue to increase and that it is planned to invest primarily in the Steel Dome air defense system. • How will the ‘Steel Dome’ air defense system work, why is it important? In addition, hypersonic, ballistic and cruise missile systems, aircraft, ships, tanks, unmanned land, sea and air systems, new generation aircraft carriers and frigates will be invested in, he said. So how does the increase in defense spending affect economic growth, and what could be the effects of the 5 percent target for Turkey? What could be the impact on Turkey? According to NATO data, Turkey’s defense expenditures increased by about 37 percent in a year from an estimated $ 16.6 billion in 2023 to $ 22.7 billion in 2024. This is equivalent to about 2.1 of the 2024 GDP. According to NATO data, Turkey needs to spend Oct.15 billion in additional expenditures in order to reach the 2024 GDP target of 3.5 percent. Speaking to BBC Turkish, Sinan Ulgen, Director of the Center for Economics and Foreign Policy Studies (EDAM), predicts that this situation may face some difficult choices in terms of Turkey’s fiscal policy. “Because there has now been an obligation to allocate a significantly higher share of total public revenue to defense,” he adds. The share of Turkey’s defense expenditures in GDP (%)Professor of Economics in the Department of Peace Studies and International Development at the University of Bradford. Dr. Ferda Halicioglu predicts that with the NATO commitment, Turkey will have to increase the efficiency of defense industry investments and exports to even higher levels. “Otherwise, economic welfare losses will increase,” says Halicioglu, answering BBC Turkish’s questions. Halıcıoğlu, who also works on Turkey’s defense spending and economy, shares the observation that the net contribution of the defense industry to the economy in recent years has been around five billion dollars. On the contrary, he notes that “from an economic point of view, an increase in defense spending has always been considered a rejection of an increase in education and health spending, in other words, an increase in welfare.” “This problem of economic preference will continue to remain on the agenda as an important contradiction,” he says. Dr. According to Luqman Saeed’s calculations, Turkey’s military expenditures averaged 3.3 percent of its GDP between 1960 and Dec. 2018. Saeed believes that the long-term economic returns of spending are limited. Accordingly, he warns that a further increase in spending may lead to an inefficient allocation of resources. Prof. Halıcıoğlu predicts that when funds such as special allowances given by the presidency are included in the defense industry in Turkey, its share in GDP may increase to 5 percent. However, these funds are not included in the NATO calculations.
After the NATO Summit, there were also sections in Turkey who expressed their concerns in this direction. CHP Deputy Chairman Yankı Bağcıoğlu warned in a statement on June 27 that “increases that will be made without taking into account Turkey’s budget priorities” may have a negative impact on vital areas such as health, education, social services and infrastructure. Bağcıoğlu argued that these goals should be determined “not based on NATO, but in line with Turkey’s own security realities and national interests.” The Confederation of Revolutionary Trade Unions of Workers (DISK) also reacted to the decision. DISK Chairman Arzu Çerkezoğlu criticized the 5 percent rate in a statement on June 27 and said as follows: “Those who want to raise the minimum wage will be told that ‘inflation increases’, pensions will be told that there are no resources, public investments in education, health and social services will be cut off. In short, public resources will be mobilized not for human life, but for war.” ‘Undermining regional security could harm economic performance’ Experts believe that Turkey’s decision to increase its defense spending cannot be evaluated independently of geopolitical developments. Ferda Halicioglu reminds that Turkey has the second largest army and capacity of NATO. He states that “due to the geopolitical environment in which it is located, it is necessary to increase defense spending.”