The Turkish economy: Strong but vulnerable A KEY selling-point for Recep Tayyip Erdogan to voters is Turkey's economic performance. After a volatile 1990s and a huge bust in 2001, his Justice and Development (AK) government has presided over steady high growth and modest inflation. In 2010 and 2011 the economy grew by a China-like 9%, leading to serious fears of overheating. GDP growth slowed to 2% in 2012. Despite surprisingly strong first-quarter figures this week, it is likely to be only 3-4% this year, not enough to keep unemployment down in a growing population. But defenders of the government (and the central bank) maintain that Turkey has engineered a soft landing. Yet the country remains heavily dependent on capital inflows, and thus on foreign investors" confidence. That is why the financial markets" swoon since the protests began in Taksim Square earlier this month matters. By mid-week the Istanbul stockmarket index was down by 20% from its all-time peak on May 22nd. Mehmet Simsek, the finance minister, insists the economy is more robust than it was a decade ago. He points to a solid fiscal position (gross public debt is just 36% of GDP); low household and corporate debt; a good record of job creation; strong banks, with average capital at twice the Basel minimum level; and large and rising foreign-currency reserves. Turkey has structural economic weaknesses, however, including an overregulated labour market, high minimum wages, a big unproductive informal sector, low female participation in the workforce and poor education. Mr Simsek says the government is reforming, investing in education (teacher numbers have risen by 350,000 in a decade) and spending a lot on infrastructure. But the protests suggest there is widespread opposition to mega-projects. The biggest concern about Turkey is external. A slowing economy has trimmed the current-account deficit (see chart). But it will still be 6% of GDP this year. Worse, the deficit is largely financed by short-term capital inflows. As one economist notes, Turkey is like a high "beta" economy: strong growth and good returns, but at the price of excessive volatility. That makes it unsurprising that the Turkish lira has fallen to its lowest level in 18 months (like other emerging-market currencies, see article). The government touts decisions by two big rating agencies to raise Turkey to investment grade. But domestic political unrest, recession in the euro zone (still Turkey's biggest export market) and turmoil in Syria and the region could easily dent confidence. That makes it an especially foolish moment for Mr Erdogan to launch an attack on foreign speculators and what he calls the "interest-rate lobby," as he did this week. With low domestic savings, his country sorely needs foreigners" capital - maybe more than ever after the past two weeks.