OECD Economic Surveys: Turkey 2012: Edition 2012

Description

OECD's 2012 survey of Turkey's economy examines recent economic developments, policies, and prospects and takes a more detailed look at real exchange rates and competitiveness and structural reforms and growth. Table of contents Executive summary Key policy recommendations Assessment and recommendations Turkey’s vigorous post-crisis recovery has drawn heavily on foreign saving Figure 1. Turkey’s performance has been strong, but imbalances have emerged Figure 2. Strong employment performance Figure 3. Private demand has been fuelled by credit Figure 4. External competitiveness affected performance The macroeconomic outlook appears relatively favourable, with risks on both sides Table 1. Short-term economic outlook Putting growth on a more balanced path Figure 5. Public and private saving and investment Monetary policy Figure 6. Inflation since 2001 Figure 7. Inflation and monetary policy Box 1. Monetary policy recommendations Fiscal policy Figure 8. Fiscal performance remains robust Box 2. Fiscal policy recommendations Financial sector policies Figure 9. Capital adequacy is high but EMBI spreads have increased Box 3. Financial policy recommendations Future growth performance will be shaped by structural policy choices Table 2. Long-term growth scenarios Reforming labour markets and advancing formalisation Figure 10. The structure of employment is still weak Figure 11. Labour productivity and degree of formalisation in selected sectors Box 4. Labour market and formalisation recommendations Strengthening human capital Box 5. Recommendations on human capital development Social cohesion policies Figure 12. Income distribution has improved but challenges remain Box 6. Social policy recommendations Furthering product market reforms Figure 13. Electricity prices in industry remain high Box 7. Recommendations on product market competition Quality of life: the case of air pollutants and greenhouse gas emissions Figure 14. Greenhouse gas emissions are low but have strongly increased despite high implicit carbon prices Box 8. Recommendations on greenhouse gas emissions and air quality Bibliography Annex A1. Past OECD recommendations on Turkey’s structural reform priorities and related national actions and plans Chapter 1. Tackling external and domestic macroeconomic imbalances Bringing down the current account deficit and financing it better Figure 1.1. Turkey’s current account deficit has reached unprecedented levels Box 1.1. Current account imbalances: international experience and theoretical considerations Key features of Turkey’s current account developments Figure 1.2. Current account developments Accumulated competitiveness losses led to a marked worsening of the trade balance Figure 1.3. Trade developments Figure 1.4. Sectoral export margins Private domestic saving needs to be strengthened Figure 1.5. Drivers of the saving-investment gap Box 1.2. Investment incentives The financing structure of the current account weakened after the crisis Figure 1.6. The financing of the current account has worsened after the crisis Table 1.1. Indicators of external financing structure How does the current account deficit compare to benchmarks? Policy options to reduce the current account deficit and inflation Monetary policy Figure 1.7. A new monetary policy regime Figure 1.8. Inflation dynamics Box 1.3. Monetary policy recommendations Financial market policy Box 1.4. Financial policy recommendations Fiscal policy Table 1.2. General government balances Box 1.5. Fiscal policy recommendations Policies to increase household saving and to channel them into productive uses Policies to improve the financing of the current account and decrease financial vulnerability Box 1.6. Structural policy recommendations Conclusions Notes Bibliography Annex 1.A1. The real exchange rate and the current account Table 1.A1.1. Trade elasticities for Turkey Annex 1.A2. Empirical analysis of inflation expectations in Turkey Table 1.A2.1. Inflation expectations estimation results Figure 1.A2.1. Changing impacts on inflation expectations Chapter 2. Structural reforms to boost long-term growth More and better jobs Broadening employment opportunities Figure 2.1. Strong employment performance Figure 2.2. Strong job creation in emerging regions Box 2.1. New growth regions and Turkey’s trade specialisation Figure 2.3. Turkey’s revealed comparative advantages, 2001-10 Figure 2.4. Low-skilled and aggregate employment rates have recently improved Shifting employment to the formal sector: indispensable labour market reforms Figure 2.5. Job creation in emerging regions has drawn on informality Map 2.1. Informal employment in Turkey's 26 NUTS2 regions Figure 2.6. Labour productivity and degree of formalisation in selected sectors Box 2.2. Recommended priorities for labour market and formalisation reforms Boosting productivity growth Figure 2.7. Medium-to-high tech sectors have grown strongly and promoted productivity growth Box 2.3. The recent acceleration of FDI inflows in the Istanbul region Improving education and human capital Box 2.4. Recommendations on education policies Modernising the regulatory framework for doing business Box 2.5. Turkey’s position in international business environment comparisons Box 2.6. The positive experience of air transportation reforms Box 2.7. Recommendations on competition and product market reforms Conclusions Notes Bibliography Annex 2.A1. Long-term growth scenarios Box 2.A1.1. Growth model and baseline assumptions Table 2.A1.1. Long-term growth scenarios