Remarks by Angel Gurría, OECD Secretary-General, at a joint conference organised by the Turkish Industrialists’ and Businessmen’s Association (TÜSIAD), the Foreign Economic Relations Board (DEIK) and the Istanbul Stock Exchange Market (IMKB)
15 December 2008,
Good morning Ladies and Gentlemen,
It is great pleasure to be in Istanbul to participate in these discussions on “The Global Economy and Turkey”. It was very interesting to hear the preceding remarks by the two leading representatives of the private sector, as well as those by the Chairman of the Istanbul Stock Exchange. Turkey is one of the most dynamic OECD economies, with a 7% average annual growth since 2002 (i), and it is important to listen to the experience and perspectives of its business community and its financial sector.
1. The state of the global economy
Let me start by confirming what most of you already perceive. The global economy is indeed in a state of shock. The financial crisis has cost the world economy trillions of dollars. It has also caused huge damage to global economic confidence and it is now affecting the real economy, and causing millions of job losses.
Indeed, according to our latest Economic Outlook, the slowdown has turned into a recession. During 2009, the OECD’s GDP is expected to decline by a 1/3 of a percent (ii). Emerging economies are now slowing down at a worrying pace. This global contraction is hurting families. After falling for several years, the average unemployment rate in the OECD area is projected to increase from 5.6% in 2007 to 7.2% in 2010. This means about 10.2 million more unemployed than in 2007 (iii).
Apart from reforming the global financial system, the global economy needs a major coordinated impulse. Important fiscal stimuli are being approved in many countries. But they will only do the trick if they are accompanied by effective policies in a wide range of areas. OECD is working on a comprehensive Strategic Response to help countries design those policies.
So, what are the main implications that we see for Turkey?
2. The implications for Turkey
First of all I have to acknowledge and praise Turkey for its efforts to implement structural reforms during the last years. Had Turkey entered the present global crisis without having strengthened its economic structures through the reforms of the early 2000’s, you would now be facing significant difficulties.
This recent macroeconomic consolidation, however, has not been enough to shield the Turkish economy from the global financial crisis. And the impact is being felt in different ways; mainly through financial, trade and confidence channels. Our Economic Outlook projects a considerable slow-down of GDP growth, from 4.6% in 2007 to 3.3% in 2008 and then to 1.6% in 2009 (iv).
Like in other OECD countries, new fiscal support to stimulate the economy and enhance confidence is being widely discussed. Fiscal stimuli are necessary in many countries now to help jump-start growth. However, in Turkey’s current circumstances the benefits to be expected from fiscal action alone should not be overestimated.
In a relatively small-size and open economy like Turkey the so-called “multiplier” effect of public spending is not large. Yet, a number of cleverly designed, targeted and temporary measures may help stimulate domestic demand and employment, and contribute to international stimulation efforts.
Such measures should be supported with a robust and credible fiscal framework. Entrenching the credibility of fiscal policy through enhanced transparency and reliable spending rules and backing monetary policy with further structural reforms, will thus be essential.
3. A “structural” way forward
As a delegate to a recent OECD meeting stated, a crisis is a terrible thing to waste. Indeed, Turkey should consider the current crisis as a reform opportunity for addressing long-term structural issues. The financial turbulence and the economic slowdown will demand immediate tough actions, but this should not distract us from our long term challenges. On the contrary, it is precisely by addressing our structural challenges that we will pull our economies out of this recessive phase.
Already before the financial turmoil, Turkey’s fundamental challenge was resuming strong trend growth. To help the Turkish government address these challenges, our OECD Survey from July 2008 (the summary Policy Brief of which is being distributed) introduced a set of recommendations. Let me mention four of them, which I consider crucial to help Turkey consolidate long term sustainable growth:
Ladies and gentlemen,
The solution to this crisis will demand an unprecedented collective response. Each country will need a different policy mix, but certainly no nation will be able to fix this problem in isolation. As Joseph Stiglitz expressed in a recent article, “there are simply too many interdependencies to allow each country to go its own way”. We are facing the most global crisis in world history and the only way to end it is through enhanced and inclusive international co-operation.
But this crisis is also an opportunity, to build a stronger financial system; to bring about greener economic growth; to promote more inclusive and effective multilateral co-operation. It is a unique opportunity to innovate policies; to build legislative consensus; and to promote the needed structural reforms that will allow your companies to become more productive, competitive and ecologically oriented. The OECD and Turkey will be working together, with ever greater dedication, to make the most of this opportunity for the benefit of the Turkish people and of the world as a whole.
(i) According to figures for the period 2002-2007 from the OECD Survey, p.11
(ii) Economic Outlook, “Economic Projections for the US, Japan and the Europe area”, Press Conference, Paris, 13th November 2008, p.3
(iii) Data on unemployment provided by OECD ELS/EAP Division.
(iv) OECD Economic Outlook 84 database.
(v) OECD Factbook 2008, p.163
(vi) Joseph E. Stiglitz, “Markets can’t rule themselves”, Newsweek, December 2008.