OECD Economic Surveys: Turkey 2012: Edition 2012

110 Pages·2012·3.062 MB·English

by  Oecd Organisation for Economic Co-operation and Development

OECD Economic Surveys O
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TURKEY D
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SPECIAL FEATURES: REAL EXCHANGE RATE AND COMPETITIVENESS, n
o OECD Economic Surveys
STRUCTURAL REFORMS AND GROWTH m
ic
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Most recent editions e TURKEY
y
s
Australia, November 2010 Israel, December 2011
Austria, July 2011 Italy, May 2011
Belgium, July 2011 Japan, April 2011
Brazil, October 2011 Korea, April 2012
Canada, June 2012 Luxembourg, May 2010
Chile, January 2012 Mexico, May 2011
China, February 2010 Netherlands, June 2012
Czech Republic, November 2011 New Zealand, April 2011 V JULY 2012
o
Denmark, January 2012 Norway, February 2012 lu
Estonia, April 2011 Poland, March 2012 m
e
Euro area, March 2012 Portugal, September 2010 2
0
European Union, March 2012 Russian Federation, December 2011 1
2
Finland, February 2012 Slovak Republic, November 2010 /
1
France, March 2011 Slovenia, February 2011 4

Germany, February 2012 South Africa, July 2010
Greece, August 2011 Spain, December 2010
Hungary, March 2012 Sweden, January 2011
Iceland, June 2011 Switzerland, January 2012
India, June 2011 Turkey, July 2012
Indonesia, November 2010 United Kingdom, March 2011
Ireland, October 2011 United States, June 2012
Please cite this publication as: T
U
OECD (2012), OECD Economic Surveys: Turkey 2012, OECD Publishing. R
http://dx.doi.org/10.1787/eco_surveys-tur-2012-en K
E
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Volume 2012/14
ISSN 0376-6438
July 2012
2012 SUBSCRIPTION (18 ISSUES)
ISSN 1995-3429
SUBSCRIPTION BY COUNTRY J
-:HSTCQE=VW\^[]: u
ly
ISBN 978-92-64-12796-8 2
10 2012 14 1 P 0
1
2

OECD Economic Surveys:
Turkey
2012
This document and any map included herein are without prejudice to the status of or
sovereigntyoveranyterritory,tothedelimitationofinternationalfrontiersandboundaries
andtothenameofanyterritory,cityorarea.
Pleasecitethispublicationas:
OECD(2012),OECDEconomicSurveys:Turkey2012,OECDPublishing.
http://dx.doi.org/10.1787/eco_surveys-tur-2012-en
ISBN978-92-64-12796-8(print)
ISBN978-92-64-12797-5(PDF)
Series:OECDEconomicSurveys
ISSN0376-6438(print)
ISSN1609-7513(online)
OECDEconomicSurveys:Turkey
ISSN1995-3429(print)
ISSN1999-0480(online)
ThestatisticaldataforIsraelaresuppliedbyandundertheresponsibilityofthe relevantIsraeliauthorities.Theuse
ofsuchdatabytheOECDiswithoutprejudicetothestatusoftheGolanHeights,EastJerusalemandIsraeli
settlementsintheWestBankunderthetermsofinternationallaw.
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TABLEOFCONTENTS
TTaabbllee ooff ccoonntteennttss
Executivesummary......................................................... 8
Keypolicyrecommendations ................................................ 10
Assessmentandrecommendations........................................... 13
Turkey’svigorouspost-crisisrecoveryhasdrawnheavilyonforeignsaving...... 13
Themacroeconomicoutlookappearsrelativelyfavourable,withrisks
onbothsides........................................................... 16
Puttinggrowthonamorebalancedpath ................................... 17
Futuregrowthperformancewillbeshapedbystructuralpolicychoices......... 26
Bibliography............................................................ 40
AnnexA1. PastOECDrecommendationsonTurkey’sstructuralreformpriorities
andrelatednationalactionsandplans .................................... 42
Chapter1. Tacklingexternalanddomesticmacroeconomicimbalances ........... 45
Bringingdownthecurrentaccountdeficitandfinancingitbetter.............. 46
Policyoptionstoreducethecurrentaccountdeficitandinflation.............. 60
Conclusions............................................................ 71
Notes.................................................................. 71
Bibliography............................................................ 72
Annex1.A1. Therealexchangerateandthecurrentaccount.................. 75
Annex1.A2. EmpiricalanalysisofinflationexpectationsinTurkey............. 77
Chapter2. Structuralreformstoboostlong-termgrowth......................... 81
Moreandbetterjobs..................................................... 82
Boostingproductivitygrowth............................................. 91
Conclusions............................................................ 99
Notes.................................................................. 99
Bibliography............................................................ 101
Annex2.A1. Long-termgrowthscenarios................................... 104
Boxes
1. Monetarypolicyrecommendations.................................... 22
2. Fiscalpolicyrecommendations ....................................... 24
3. Financialpolicyrecommendations .................................... 26
4. Labourmarketandformalisationrecommendations..................... 30
5. Recommendationsonhumancapitaldevelopment...................... 32
6. Socialpolicyrecommendations ....................................... 35
7. Recommendationsonproductmarketcompetition...................... 37
8. Recommendationsongreenhousegasemissionsandairquality .......... 40
OECDECONOMICSURVEYS:TURKEY©OECD2012 3
TABLEOFCONTENTS
1.1. Currentaccountimbalances:internationalexperienceandtheoretical
considerations ...................................................... 47
1.2. Investmentincentives ............................................... 55
1.3. Monetarypolicyrecommendations.................................... 64
1.4. Financialpolicyrecommendations .................................... 65
1.5. Fiscalpolicyrecommendations ....................................... 68
1.6. Structuralpolicyrecommendations.................................... 70
2.1. NewgrowthregionsandTurkey’stradespecialisation.................... 84
2.2. Recommendedprioritiesforlabourmarketandformalisationreforms ..... 91
2.3. TherecentaccelerationofFDIinflowsintheIstanbulregion.............. 93
2.4. Recommendationsoneducationpolicies............................... 96
2.5. Turkey’spositionininternationalbusinessenvironmentcomparisons...... 97
2.6. Thepositiveexperienceofairtransportationreforms .................... 98
2.7. Recommendationsoncompetitionandproductmarketreforms........... 99
2.A1.1. Growthmodelandbaselineassumptions............................... 104
Tables
1. Short-termeconomicoutlook......................................... 17
2. Long-termgrowthscenarios.......................................... 27
1.1. Indicatorsofexternalfinancingstructure .............................. 59
1.2. Generalgovernmentbalances......................................... 66
1.A1.1. TradeelasticitiesforTurkey........................................... 75
1.A2.1. Inflationexpectationsestimationresults............................... 78
2.A1.1. Long-termgrowthscenarios.......................................... 106
Figures
1. Turkey’sperformancehasbeenstrong,butimbalanceshaveemerged...... 13
2. Strongemploymentperformance ..................................... 14
3. Privatedemandhasbeenfuelledbycredit.............................. 15
4. Externalcompetitivenessaffectedperformance......................... 15
5. Publicandprivatesavingandinvestment .............................. 18
6. Inflationsince2001.................................................. 19
7. Inflationandmonetarypolicy......................................... 20
8. Fiscalperformanceremainsrobust .................................... 22
9. CapitaladequacyishighbutEMBIspreadshaveincreased................ 25
10. Thestructureofemploymentisstillweak.............................. 28
11. Labourproductivityanddegreeofformalisationinselectedsectors........ 29
12. Incomedistributionhasimprovedbutchallengesremain................. 33
13. Electricitypricesinindustryremainhigh............................... 36
14. Greenhousegasemissionsarelowbuthavestronglyincreaseddespite
highimplicitcarbonprices............................................ 39
1.1. Turkey’scurrentaccountdeficithasreachedunprecedentedlevels......... 47
1.2. Currentaccountdevelopments........................................ 49
1.3. Tradedevelopments................................................. 50
1.4. Sectoralexportmargins.............................................. 52
1.5. Driversofthesaving-investmentgap .................................. 53
1.6. Thefinancingofthecurrentaccounthasworsenedafterthecrisis......... 58
1.7. Anewmonetarypolicyregime........................................ 61
4 OECDECONOMICSURVEYS:TURKEY©OECD2012
TABLEOFCONTENTS
1.8. Inflationdynamics .................................................. 62
1.A2.1. Changingimpactsoninflationexpectations ............................ 79
2.1. Strongemploymentperformance ..................................... 83
2.2. Strongjobcreationinemergingregions................................ 83
2.3. Turkey’srevealedcomparativeadvantages,2001-10...................... 84
2.4. Low-skilledandaggregateemploymentrateshaverecentlyimproved...... 86
2.5. Jobcreationinemergingregionshasdrawnoninformality ............... 87
2.6. Labourproductivityanddegreeofformalisationinselectedsectors........ 90
2.7. Medium-to-hightechsectorshavegrownstrongly
andpromotedproductivitygrowth..................................... 92
OECDECONOMICSURVEYS:TURKEY©OECD2012 5
ThisSurveyispublishedontheresponsibilityoftheEconomicandDevelopment
Review Committee of the OECD, which is charged with the examination of the
economicsituationofmembercountries.
TheeconomicsituationandpoliciesofTurkeywerereviewedbytheCommitteeon
14 June2012. The draft report was then revised in the light of the discussions and
givenfinalapprovalastheagreedreportofthewholeCommitteeon27June2012.
The Secretariat’s draft report was prepared for the Committee by Rauf Gönenç,
Oliver Röhn, ŞerefSaygili and Ramazan Karaşahin under the supervision ofVincent
Koen.StatisticalassistancewasprovidedbyBéatriceGuérard.
ThepreviousSurveyofTurkeywasissuedinJuly2010.
InformationaboutthelatestaswellaspreviousSurveysandmoreinformation
abouthowSurveysarepreparedisavailableatwww.oecd.org/eco/surveys.
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BASICSTATISTICSOFTURKEY(2011)
THELAND
Area(thousandkm²): Majorcities(millioninhabitants):
Total 785 Istanbul 13624
Agriculturalarea 244 Ankara 4891
Forests 215 Izmir 3965
THEPEOPLE
Population(millions) 74.0 Civilianlabourforce(million) 27.2
Inhabitantsperkm² 94.2 Civilianemployment(million) 24.1
Annualrateofchangeofpopulation,2001-11 0.0 Agriculture,forestry,fishing 6.1
Industry 4.7
Construction 1.7
Services 11.6
LFSunemploymentrate(%ofthelabourforce) 9.6
PRODUCTION
Grossdomesticproduct(GDP,TLbillion) 1295 OriginofGDP(%oftotalvalueadded):
Perhead(GDP,$PPP) 17426 Agriculture,forestry,fishing 9.1
Grossfixedinvestment(TLbillion) 283 Industry 27.6
PercentofGDP 21.9 Services 63.2
Perhead($PPP) 3811
THEGOVERNMENT
Publicconsumption(%ofGDP) 14.0 Grosspublicdebt(%ofGDP) 41.3
Centralgovernmentcurrentrevenue(%ofGDP) 22.8 Domestic 29.2
External 12.1
FOREIGNTRADE
Exportsofgoodsandservices(%ofGDP) 23.8 Importsofgoodsandservices(%ofGDP) 32.7
Mainexportsofgoods(%oftotal): Mainimportsofgoods(%oftotal):
Roadvehicles 11.4 Roadvehicles 7.0
Articlesofapparelandclothingaccessories 10.3 Petroleum 6.3
Ironandsteel 9.5 Ironandsteel 4.8
Textile 8.0 Metalliferousoresandmetalscrap 4.6
Otherexports 60.7 Otherimports 77.3
THECURRENCY
Monetaryunit:Turkishlira Currencyunitsper$(periodaverage):
Year2011 1.67
June2012 1.81
Currencyunitsper€(periodaverage):
Year2011 2.33
June2012 2.28
EXECUTIVESUMMARY
Executive summary
E
ffective macroeconomic and structural policies helped theTurkish economy rebound
vigorouslyfollowingtheglobalcrisis:growthaveragedcloseto9%in2010-11,accompanied
by strong job creation. In the process, however, the current account deficit widened to
around10%ofGDPandconsumerpriceinflationrosetoover10%.Theeconomicslowdown
since mid-2011 is helping to reduce these external and domestic imbalances, albeit only
gradually, given rising international energy prices. In order to ensure that the current
account gap moves back into safer territory and inflation to the 5% target, both
macroeconomicandstructuralpolicyleversneedtobeusedandactionhasstartedtobe
taken in this direction.This will also lay the basis for sustained improvements in living
standardsoverthelongerrun.
External competitiveness is essential for Turkey to rebalance the economy from
domestic to external demand, as well as to sustain employment, income and domestic
savingsgrowth.Competitivenessgainsparticularlyimproveemploymentopportunitiesof
thelow-skilledandhencedirectlyhelpreducepovertyandfostersocialcohesion.
Thecurrentmonetary,fiscalandmacro-prudentialpolicymixaimsatbringingdown
inflationandavoidingexcessiverealexchangerateappreciationwhilecopingwithvolatile
capital flows.To this end, the central bank uses a wide interest rate corridor as well as
changes in banks’ reserve requirements, alongside occasional foreign exchange market
intervention.Concomitantly,thesupervisoryauthoritiesareactivelyusingprudentialtools
suchasloan-to-valueceilingsandprovisioningrequirementstokeepcreditincheck.The
overall fiscal position remains sound but the stance could be tighter to better support
monetary restraint. A more transparent fiscal framework, with a general government
spendingcapandgreateremphasisoncyclically-adjusteddevelopments,wouldhelptoo.
Employmentandlabourmarketparticipationratesareontherisebuttoomanyofthe
newjobsarecreatedintheinformalsectorandtheskillsofthemajorityofthelabourforce
remaintoolow.Bothexertadragonproductivityandcompetitiveness.Toencouragehiring
intheformalsector,amoreflexiblelabourcontractisneededandminimumwagesetting
shouldbedecentralised.Enrolmentintheeducationsystemhasrisenbutthereisample
scope to improve quality and equity, notably by granting more autonomy to schools and
universities, and shifting to per-student funding with adjustments for socio-economic
disadvantages.Upskillingoftheexistinglabourforcewillbekeytoimproveemployability.
Boosting productivity also requires pushing ahead with product market reforms.
Greater competition in the energy, telecommunication and agricultural sectors would
benefit consumers and economy-wide competitiveness, and help reduce the external
deficit.The long-planned liberalisationof the electricityand natural gas sectors needsto
be implemented. Broadband internet services need to be more open to competition.
Supporttoagricultureoughttorestlessonpricesupportandmoreondirecttransfersand
ruraldevelopment.
8 OECDECONOMICSURVEYS:TURKEY©OECD2012