Turkey [1987-1988]

127 Pages·1988·6.765 MB·English

by  OECD

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URVEY!
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ECONOMIC SURVEYS
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TURKEY
ORGANISATION FORECONOMIC CO-OPERATIONANDDEVELOPMENT
Pursuanttoarticle 1 oftheConventionsignedinParison 14th December,
1960,andwhichcameintoforceon30thSeptember, 1961,theOrganisation
for Economic Co-operation and Development (OECD) shall promote
policiesdesigned:
- toachievethe highestsustainableeconomicgrowthandemployment
andarisingstandardoflivinginMembercountries,whilemaintaining
financial stability, and thus to contribute to the development ofthe
world economy;
- to contribute to sound economic expansion in Member as well as
non-membercountries in the processofeconomicdevelopment; and
- to contribute to the expansion of world trade on a multilateral,
non-discriminatory basis in accordance with international obliga¬
tions.
The original Member countries of the OECD are Austria, Belgium,
Canada, Denmark, France, the Federal Republic of Germany, Greece,
Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal,
Spain,Sweden,Switzerland,Turkey, the United Kingdomand the United
States. The following countries became Members subsequently through
accessionatthedatesindicatedhereafter:Japan(28thApril, 1964),Finland
(28thJanuary, 1969), Australia (7thJune, 1971) and New Zealand
(29th May, 1973).
The Socialist Federal Republic ofYugoslavia takes part in some ofthe
work oftheOECD (agreement of28thOctober, 1961).
Publiéégalementen français.
©OECD, 1988
Application forpermission toreproduce or translate
all or part ofthis publicationshould be made to:
HeadofPublications Service, OECD
2, rue André-Pascal, 75775 PARISCEDEX 16, France.
Contents
Introduction 9
I. Recenttrends 11
Supply and use ofresources 11
The labour market 15
Prices, costs and profits 17
Foreign trade and balance ofpayments 21
II. Economicpolicies 37
Monetarypolicy 38
Fiscalpolicy 47
Foreign debt, exchange rate depreciation and fiscal policy 56
III. Short-termforecasts 60
IV. Financial markets 63
The structure offinancial assets 64
The banking system and its regulation 65
Efficiency of deposit banks 68
Credit creation 70
The financing ofthe non-financial private sector 73
Preferential credit 75
The insurance industry 78
The capital market 80
Issues and problems of financial market reform 85
V. Conclusions 91
Notes and references 97
Annex: Calendar of main economic events 99
Statistical annex 108
Tables
Text
1. Supply and use of resources 12
2. Gross fixed investment by sector 13
3. Total factor productivity 15
4. Labour market 17
5. Prices 18
6. Wages 20
7. Foreign trade 24
8. Constant market share analysis 25
9. Commodity composition of exports 26
10. Geographic distribution of foreign trade 28
11. Balance ofpayments 31
12. External debt of Turkey 33
13. External debt service 34
14. Decomposition of the change in the debt-export ratio 36
15. Money and credit 39
16. Foreign-exchange position ofdeposit money banks 40
17. Central Bank credits 41
18. Deposit interest rates 45
19. Lending rates 46
20. Public sector borrowing requirements 48
21. Central government budget 50
22. Central government budget revenues 51
23. Financial account of the State Economic Enterprises 53
24. Consolidated account ofspecial funds 54
25. Short-term forecast 61
26. Domestic financial assets 64
27. Costs and margins in the banking sector 69
28. Total bank credits 70
29. Bank credits by sectors 71
30. Distribution of the domestic financial claims of the banking sector 72
31. Sources of financing for the largest private industrial firms 73
32. Debt service indicators for the largest private industrial firms 74
33. Distribution of value added for the largest private industrial firms 74
34. Balance sheet of the insurance industry 79
Statistical annex
A. National product 108
B. Supply and use ofresources 109
C. Agriculturalproduction 110
D. Industrial production 111
E. Prices 112
F. Imports by commodities 113
G. Exports by commodities 114
H. Balance ofpayments 115
I. Money and banking 117
J. Workers' remittances by months 118
K. Dollar exchange rate of the Turkish lira 119
L. Central government budget 120
Diagrams
Text
1. Labour market developments 16
2. Trend ofprices 19
3. Exchange rate developments 22
4. Structure of the balance ofpayments and foreign trade performance 29
5. Sources and uses offoreign exchange earnings 30
6. Foreign debt 34
7. Decomposition of the change in the debt-export ratio 35
8. Money supply and counterparts 42
9. Contribution of reserve money and money multiplier to M2 growth 43
10. Legal reserve ratio 67
11. New issues ofsecurities 82
12. The real after-tax interest rate on bank deposits 86
This Survey is based on the Secretariat's study
preparedfortheannualreviewofTurkeybytheEconomic
andDevelopmentReview Committeeon 11th July1988.
After revisions in the light ofdiscussions during the
review, final approval ofthe Survey forpublication was
given bythe Committeeon27thJuly 1988.
The previous survey of Turkey was issued in
June 1987.
BASIC STATISTICS OF TURKEY
THELAND
Area(thousandsq.km) 781 Majorcities, 1985
Agriculturalarea(thousandsq.km) 280 (thousandinhabitants):
Forests(thousandsq.km) 202 Istanbul 5495
Ankara 2252
Izmir 1490
THEPEOPLE
Population. 1987(thousands) 52059 Civilianlabourforce, 1987 (thousands) 18804
Persq.km, 1987 67 Civilianemployment: 15948
Annualaveragerateofchange Agriculture,forestry,fishing 8757
ofpopulation(1980-1985) 2.2 Industry 2281
Construction 686
Services 4224
PRODUCTION
GNP, 1987(TLbillion) 57857 OriginofGDP, 1987(percent):
Perhead(US$) 1113 Agriculture,forestry,fishing 17.4
Grossfixedinvestment, 1987 Industry 32.2
(TLbillion) 14150 Construction 4.1
PercenlofGNP 24.4 Services 43.7
Perhead(USS) 23.2
THEGOVERNMENT
Publicconsumption, 1987 Publicdebt,end-1987
(percentofGNP) 9.1 (percentofGNP): 59.5
Centralgovernmentcurrentrevenue, Domestic 28.0
1987(percentofGNP) 17.5 Foreign 31.5
FOREIGNTRADE
Commodityexports, 1987,fob Commodityimports, 1987,cif
(percentofGNP) 15.1 (percentofGNP) 21.1
Mainexports(percentoftotalexports): Mainimports
Agriculture 18.2 (percentoftotalimports):
Mining 2.7 Machineryandequipment 23.8
Industry 79.1 Transportequipment 3.9
Basemetals 14.1
Oil 19.1
WORKERS'REMITTANCES
(USS million)
1986 1696 1987 2102
THECURRENCY
Monetaryunit:Turkishlira CurrencyunitperUSS,
averageofdailyrates:
1985 519.46
1986 669.03
1987 854.63
Note: Aninternationalcomparisonofcertainbasicstatisticsisgiveninanannextable.
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Introduction
In 1987, the Turkish economy again significantly exceeded the official target for
output growth : real GNP expanded V/2 per cent, 2V2 percentage points more than
projected. Employment continued to rise and the high unemployment rate declined,
albeit moderately, for the second time in the last twelve years. Total demand was
boosted by the buoyancy of exports, consumption and residential investment, but
privateandpublicmanufacturinginvestmentweakened. Duetothevigorousrecovery
of exports, the real foreign balance improved significantly, reducing the current
external deficit from $1.5 billion in 1986 to just below $1 billion.
The major cause of the continuing strength of demand was clearly an expan¬
sionary fiscal and monetary policy stance, which increased inflationarypressures. By
early 1988, prices were increasing at a rate of about 70 per cent. From December
1987, the authorities started tightening policy. Thus, the authorities are aiming to
reduce the consolidated (central government) budget deficit from 4.2 per cent of
GNP to 2.2 per cent in 1988 through spending restrictions and increased taxes, as
well as improved revenue collection. In particular, it was decided not to start any
new large-scale infrastructure investments and to slow down the implementation of
ongoingprojects. Asregardsmonetarypolicy, reserveandliquidityratiosanddeposit
interest rates were all significantly increased.
In line with the strategy adopted in 1980 to move towards a system of market-
determinedresourceallocation,theliberalisationoffinancialmarketsandofexchange
regulations has been given a prominent place in the Government's medium-term
programme. From 1986, emphasis has been put on the development of money and
capitalmarketsasnecessarypreconditionsforchannellingmoreprivatefundstowards
productive investment. The establishment of an interbank market and new instru¬
ments for conducting open-market policy have enhanced the ability of the Central
Bank to control monetary aggregates and credit expansion.
Currenteconomictrendsare discussedinPartIofthepresentEconomicSurvey;
the development ofTurkey's foreign debt and majorfactorsthat influence it are also