Economic surveys and country surveillance

Economic survey of Turkey 2008: Executive summary

 

Contents | How to obtain this publication | Additional information

The following is the Executive summary of the OECD assessment and recommendations, taken from the Economic survey of Turkey, published on 17 July 2008.

 

Contents                                                                                                                             

Far-reaching institutional and structural reforms following the 2001 crisis underpinned an unprecedented period of high growth until 2007. More recently, however, tensions arose and growth slowed down as a result of loss of competitiveness in large areas of the economy, the deterioration of international conditions, and a weakening of confidence domestically. New government initiatives to strengthen the macroeconomic policy framework, and upgrade the competitiveness of industry and its capacity to create jobs, would help the economy resume a stronger growth course. The main challenges in this respect are:

  • Preserving the gains of fiscal consolidation and making fiscal policy more compatible with higher growth;
  • Resuming disinflation and better aligning structural policies as well as fiscal policy with the inflation targeting framework;
  • Reducing barriers to formal employment in order to mobilise the productivity potential and improve the resilience of the Turkish economy.


Consolidating macroeconomic policies

In the area of fiscal policy, the gains of recent fiscal-institutional reforms and vigorous fiscal consolidation should be preserved, and credibility enhanced, in the wake of transition from IMF monitoring. This can be achieved by enforcing multi-yearly spending ceilings combined with a primary surplus target, aimed at continuing to reduce the public debt ratio.


In the area of monetary policy, the disinflation strategy of the Central Bank needs the support of more comprehensive policies to improve inflation expectations, including the full implementation of a robust fiscal framework, competition reforms to moderate service price growth, and encouraging social partners to adopt the inflation target as an anchor in pricing and wage behaviour.

 

Bolstering the competitiveness and job-creation capacity of the business sector

The business sector has to cope with rising competition from low-cost countries, and trend real currency appreciation, by accelerating productivity gains, keeping wage growth in line with profitability, and innovating and differentiating products. This should be achieved not only in the most sophisticated segments of industry, but also in traditional labour-intensive activities.


Latent productivity and competitiveness potential should be mobilized by facilitating formalisation, thereby encouraging firms, which make fuller use of modern technology, skilled labour, capital and FDI resources.


Two top priorities in fostering the growth of the more productive part of the economy are: i) reforming labour market regulations to overcome the divide between law-abiding but rigid and very flexible but law-breaching employment practices, and ii) upgrading corporate finance markets to permit firms joining the formal sector to rapidly improve their capital base, productive capacity and productivity.


By deepening the recently started reform initiatives in these areas, Turkey can improve employment prospects for the growing urban working-age population, restore full confidence in its growth prospects, improve risk premia and its credit-rating, and thereby move to a faster catching-up path.

 

 

How to obtain this publication                                                                                   

The Policy Brief (pdf format) can be downloaded in English. It contains the OECD assessment and recommendations.The complete edition of the Economic survey of Turkey 2008 is available from:

 

Additional information                                                                                                  

 

For further information please contact the Turkey Desk at the OECD Economics Department at eco.survey@oecd.org.  The OECD Secretariat's report was prepared by Rauf Gönenç, Rina Battacharya, Olcay Culha and Cafer Kaplan, under the supervision of Andreas Wörgötter. Research assistance was provided by Béatrice Guérard.

 

 

 

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