Turkish Reforms
And
Their Social Implications
April 2013
Emre Deliveli
Outline
1. Summary of Turkish Reforms
2. And their social implications
Brief history of reforms in Turkey
• 1920s: Reforms aimed at westernization
– (Secularism, civil law etc.)
• 1940s: Transition to democracy
– (Multi-party politics)
• 1950s: NATO membership
– (Western security alliance framework)
• 1980s: First generation economic reforms
– (Price reforms, free trade)
New political
elite, new
energy
• 2000s: EU reforms + completion of first generation
reforms
– (Improvement in democraticSecond
standards)
generation reforms
Mediterranean is Turkish Economy?
(institutions & skills)Slide 3
– (Fiscal discipline, How
macroeconomic
stability)
?
Key dynamic: rapid urbanization
(= main source of economic growth)
Urban population as a percentage of the total population in Turkey and EU countries,
(%), 1960-2010
80
70
60
European Union
50
Turkey
40
30
20
1960
1965
1970
1975
1980
1985
1990
1995
How Mediterranean is Turkish Economy?
2000
2005
2010
Slide 4
Source: World Bank, World Development Indicators
Summary of Turkish Reforms
1. The Ozal Years
The 1980 reforms to downgrade the import-substitution based development strategy in order to
upgrade an export-led growth helped to catch a high growth platform for a couple of years but such a
high level of re-structuring had its own drawbacks and financial liberalization policies created a
banking crisis in 1983.
However, the recovery was fast and Turkey experienced strong growth for another decade.
Financial liberalization also brought new diseases to potential growth, such as dollarization.
International financial institutions, such as the International Monetary Fund (IMF), were familiar visitors
in those years but this did not prevent another heavy banking crisis in 1994.
The 1990s are generally been accepted as lost years not only because of the 1998 earthquake but
also because of the global financial spillover, such as the Russian and the Far-East crises. The
decade ended with a deep economic crisis in 2001
Summary of Turkish Reforms
1. Dervis and Justice and Development Party (AKP)
Expansionary fiscal contraction
Inflation Targeting
Banking Reform
Expansionary fiscal contraction I
Fiscal discipline since the 2001 crisis has led to a decline in budget deficit
to 1%, while the primary balance generated over 5% surplus. Having risen
to 5.5% in 2009 due to the crisis, the budget deficit has improved since
then, falling to some 1.4% of GDP in 2011.
Expansionary fiscal contraction II
Debt to GDP ratio of above 70% post 2001 crisis has fallen to below 40%.
This has led Treasury rates to permanently decline to single digits.
The Sharp fall interest rates
As a result, nominal and real rates fell sharply.
Inflation: The Long View
Inflation has declined to high single-digit levels from over 70% in 2002, yet
hasn’t been able to break the 7-11% band on the downside since 2004,
except during the crisis.
Results: Growth
End of the sharp swings?
8.6
Economic transformation: a lot of diversification
and a little bit of sophistication
Turkey’s top-5 export items
(1980, share %)
Turkey’s top-5 export items
(2010, share %)
5.45
13.57
11.09
3.47
3.01
7.95
6.16
2.93
4.48
0
2.42
5
10
15
How Mediterranean is Turkish Economy?
0
2
4
6
Slide 12
Source: UN COMTRADE
Rapid trade integration after 2001 crisis
Turkey’s imports to and exports from the World
1990-2011, USD bn
250
imports
200
150
exports
100
50
How Mediterranean is Turkish Economy?
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
0
Slide
13
Source:
UN COMTRADE,
TEPAV Calculations
Unemployment: The Long View
The key to understanding Turkish labor force is not people who cannot find
work, but those who don’t want to work.
Inequality
Simple Gini Coefficient hides some of what is going on.
Poverty
What is missing? Turkey’s connectivity problem
(+ prioritization problem: carrying passengers vs. carrying containers)
Regional Picture
Six-lane Expressways (red lines, as of 2010) and the change in the number of firms located in the
provinces that had more than 5 firms in the largest 1000 industrial enterprise rating of the Istanbul
Chamber of Industry by 2009, between 1997 and 2009.
İstanbul
- 105
Tekirdağ
+6
Bursa
Balıkesir + 28
+2
İzmir
- 37
Kocaeli
Sakarya
+ 40
+4
Samsun
+8
Ordu
+1
Trabzon
+3
Bolu
+2
Eskişehir
Ankara
+1
+ 18
Manisa
+7
Kayseri
+ 10
Konya
+ 12
K.Maraş
+ 11
Adana
+7
Denizli
0
Antalya
+2
Karaman
-1
Mersin
Hatay
How Mediterranean
is Turkish Economy?
-3
+8
Gaziantep
+ 15
Slide 17
What is Missing? Education policy is economic policy for Turkey
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Average age of the
population
Female labor force
participation rate (%)
Average years of
education
USA
China
Japan
Germany
France
UK
Brazil
Italy
India
Canada
Russia
Spain
Mexico
S. Korea
Australia
Netherlands
36.9
35.5
44.8
44.9
39.9
40.0
29.3
43.5
26.2
41.0
38.7
40.5
27.1
38.4
37.7
41.1
58
67
48
53
51
55
60
38
33
63
58
49
43
50
58
60
12.4
7.5
11.5
12.2
10.4
9.5
7.2
9.7
4.4
11.5
8.8
10.4
8.7
11.6
9.8
11.2
Turkey
28.5
24
6.5
Indonesia
Switzerland
Poland
28.2
52
41.7
61
46Economy?
How38.5
Mediterranean is Turkish
5.7
10.3
10.0
Slide 18
Thanks for listening!
Questions & Discussion
Emre Deliveli
emre.deliveli@gmail.com
+90 533-6365340
www.economonitor.com/emredeliveli
Hurriyet Daily News columns