From The Financial Times:
The city where Turkey’s republic lost its way
Published: June 27 2007 01:41 | Last updated: June 27 2007 01:41
If anywhere in Turkey ought to be an opposition stronghold, it is Sivas. This city of 350,000 people on the high Anatolian plateau, 450km east of Ankara, was the base from which Ataturk’s republican revolution spread to the rest of the country nearly 90 years ago. A slogan in gold lettering beside a statue of the nation’s founder, just off the main square, says: “The republic began here.”
A month before Turkey’s general election, however, the republic that Ataturk founded seems to be in retreat in this slightly shabby city.
The main opposition Republican People’s party (CHP), which sees itself as the guardian (along with the military) of Ataturk’s republic, was once the strongest political force here. Before 1980, the party won comfortably in Sivas. Now it struggles to be relevant, not only here but also in much of Anatolia.
The gradual shift from the secular left to the religiously conservative right that characterises Turkish politics in recent decades may be more evident in Sivas than anywhere else in Turkey.
Even some of the opposition’s supporters admit that the shift has left the party high and dry. The CHP is a secular, vaguely leftist and overtly statist party in a country of conservative capitalists. That might explain its close links to the military, which has ousted four elected governments in Turkey since 1960.
“The move from left to right is the trend especially in central Anatolia,” says Osman Yildirim, a disillusioned CHP supporter who is president of the Sivas chamber of commerce and industry.
“The left had no solutions for Turkey’s problems and it is seen as distant from religion, and Turkey is a religious country.” Until the party modernises, he says, it will continue its losing streak in former republican bastions such as Sivas.
Malik Ecder Ozdemir, the main CHP candidate in Sivas, sounds equally glum, if a little more defiant. He insists the party will do better in the July 22 election than it did at the last election in 2002, when it captured one of the six seats the city and province of Sivas have in parliament.
The outgoing government of the Justice and Development party (AKP), which has Islamist roots and is the chief beneficiary of the swing to the right, won the other five.
“Sivas is important for the CHP,” Mr Ozdemir says. “If we are weak here we are weak all over Turkey.”
The main factor in shifting the political orientation of Sivas is migration. The city has absorbed migrants from the surrounding provinces, who brought their conservative rural and small-town customs to the city and who tend to be self-employed or to work for their kith and kin. They have gradually outnumbered state employees, who would have voted for the CHP.
“Migration is the problem – it is changing the balances in Turkey,” says Mr Yildirim.
Vahap Sag, a sociologist at Republic University in Sivas, says: “The better-educated and wealthier people are leaving and poorer people are arriving. Sivas is becoming more religious, and that is reflected in voting patterns.”
This election has been called four months early to try to resolve a clash between Turkey’s secularists (including the CHP and the military) and the AKP. The AKP wanted to put Abdullah Gul, the foreign minister whose wife wears the Muslim headscarf and who has past links with Turkey’s Islamist movement, into the president’s job.
That sparked a constitutional crisis. The CHP accuses the government of trying to undermine secularism, while the AKP insists it had a democratic mandate to appoint Mr Gul.
The two visions of Turkey – one secular, one democratic – are the central issues in this election.
Whether the CHP can regain prominence in its former stronghold poses an organisational and political challenge. One factor in its favour in Sivas is that Abdullatif Sener, the leading MP for the city who was a senior and respected moderate in the outgoing government, has not sought re-election. This may eat into the AKP’s support.
Mr Ozdemir agrees that Mr Sener’s withdrawal is a bonus. But he paints a much starker picture of what is at stake in this election.
“Turkey is changing,” he says, “but it is not changing for the better. People ask me, ‘Don’t you have any other policies besides secularism and protecting Ataturk’s principles?’
“Now, I think, people accept that those principles are under threat. This is the most important election in Turkey’s history.”
Wednesday, July 25, 2007
Thursday, July 19, 2007
Turkey and the EU
From MS GEF
Turkey: The Real Stake of Turkey-EU Negotiations
Serhan Cevik and Eric Chaney | London
We need to put Turkey’s relations with the European Union into a historical context, before analysing its convergence path. The process of “Europeanisation” started centuries ago during the Ottoman Empire, with the realisation of scientific and institutional progress in the west. But it really accelerated to a revolutionary pace in the early decades of modern republic under the reign of Ataturk, overhauling archaic institutions and bringing economic rejuvenation to the agrarian society. Unfortunately, despite such significant progress, a dreadful sense of inertia descended over the country, and political frictions slowed institutional modernisation. Consequently, although Turkey applied for associate membership status in the European Economic Community in 1959, the EU waited until 1999 to confirm the candidacy status and until 2005 to start accession negotiations. Nevertheless, Turkey’s difficult relations with the EU have always played a fundamental role in its institutional and economic development.
Bringing political and economic institutions into line with European standards will transform Turkey’s economy and social standing, but it would be naïve to expect accession talks to be straightforward, without any challenges. The experience of the last twelve months is an obvious case in point. First, despite the encouraging steps forward in recent years, Turkey still has a long list of political and socio-economic requirements to complete. Second, Europe’s enlargement fatigue and the unresolved Cyprus conflict will keep obstructing Turkey’s accession process, even if Turkey meets all the conditions without any delay. Indeed, Turkey’s membership aspirations have always been an important feature in the “widening versus deepening” debate in Europe, but the prevailing rhetoric suggests a deeper resistance to further integration and enlargement. In our view, these underlying shifts in Europe’s political climate are likely to place new stumbling blocks (such as the argument on the Union’s absorption capacity) in front of Turkey’s accession process.
One of the major concerns is the income inequality between Turkey and the EU and regional income disparities within Turkey. Turkey’s per capita GDP in purchasing power standards was just 29.8% of the EU-25 average in 2005, even below Bulgaria (31.9%) and Romania (32.9%). Furthermore, although the latest figure represents a 16% increase from the country’s relative income level of 25.7% in 2001, it is still below the average of 30.5% in the 1990s. As a result, Europeans perceive Turkey’s young and growing population as a threat that could lead to a wave of immigration. However, we believe that such figures alone are not enough to reach a gloomy conclusion. As a matter of fact, an encouraging process of convergence is already underway and the Turkish economy should continue catching up with the EU over the medium term. Even in the near future, we are likely to see further improvements that would raise Turkey’s per capita income to 34.2% of the EU-25 average (or about 40% if we take into account the conversion of national accounts to the European standard) by the end of 2008.
Many fear Turkey’s growing population with an average age of 26.5, but we see it as a demographic gift that could help the country achieve faster convergence. After all, working-age population is the basis for employment and income growth. Turkey’s problem has always been the low level of employment limiting the speed of convergence. While the share of the working-age population in total population stands at 71.2% (compared to 64% in Europe), the number of employed is just 45% of the working-age population (compared to 63.8% in Europe). The employment rate is partly a function of the level of labour force participation, which unfortunately stands at 49.3% compared to 72% in Europe. However, if Turkey improves the state of the labour market and brings its employment rate to the European level, the number of employed could increase by almost 50%, or by 11.6 million workers. Put differently, Turkey can potentially create new jobs that would be approximately half of the entire employment in the ten new members of the EU. Given the significant difference between per capita GDP and per worker GDP, that would imply a level of per capita income that is already at about 50% of the EU-25 average, even with today’s figures. In other words, Turkey’s demographic characteristics that may look like a threat now are actually an indication of its great potential to accelerate the pace of income convergence.
Macroeconomic normalisation and structural changes have acted like a “technology shock” raising the rate of productivity growth to a higher plateau. And given the favourable demographic trends, we estimate Turkey’s potential growth rate at around 7.5% — three times the EU-25’s potential. Of course, having a great potential is no guarantee for catching up with the rest of Europe at an accelerated pace. Maintaining the actual growth rate close to the potential growth rate, without triggering inflation pressures, is a challenging task that requires prudent macro policies and, more importantly, a wide-ranging set of structural reforms to remove microeconomic bottlenecks. As discussed above, one of the important building blocks for such a scenario is improving the economy’s labour absorption capacity. Greater flexibility in the labour market, together with the rationalisation of the tax regime and bureaucracy, would certainly help accelerate job creation and reduce inefficiencies in traditional sectors of the economy. For example, gross value added per worker in the agriculture sector is less than one-third of those figures for services and manufacturing sectors. In other words, sectoral productivity differentials (reflecting structural problems) also explain regional income disparities and the low level of per capita income relative to the EU average. Therefore, by improving labour-market conditions, Turkey can enhance its potential growth rate and keep its actual growth rate close to its potential.
Turkey may have the potential to boost employment growth, but that is not an automatic process even with more flexible labour-market regulations. Educational attainments are crucial, especially in today’s global economy. Even though we have seen a steady improvement over the years that will no doubt make the next generation of workers better equipped, Turkey’s human capital endowment remains low compared to other countries. For example, the share of the adult population with upper secondary education is 25% in Turkey, as opposed to the OECD average of 56%. This is partly a result of “gender gap” in educational attainments that also leads to an unusually low female participation in the labour force. Therefore, Turkey needs a comprehensive strategy to improve human capital endowment across the board. That is of course necessary but not sufficient to achieve higher productivity and income growth. After all, labour productivity depends on the capital-to-labour ratio and total factor productivity, not just the quality of human capital.
Even though fiscal consolidation and restructurings in the banking sector have led to a better allocation of capital, domestic savings are inadequate to finance Turkey’s investment requirements. This is why it needs a sustained increase in foreign direct investment, which had remained at an annual average of $720 million (or 0.4% of GDP) and accounted for a mere 2% of capital spending between 1985 and 2003. But that was not surprising, given macroeconomic volatility and structural limitations keeping foreign firms away from the Turkish market. The good news is that macroeconomic normalisation and institutional improvements in the investment climate have already led to a breakthrough in FDI flows — surging to $9.8 billion (or 2.7% of GDP) in 2005 and around $20 billion (or 5.2%) this year. Obviously, the EU accession process plays an important role in attracting FDI and therefore accelerating productivity growth. It has happened in numerous other countries, and Turkey should enjoy a similar injection of low-cost capital with positive externalities. Coupled with higher educational attainments, the FDI-driven accumulation of new technologies and know-how would support the rise in total factor productivity growth, which already increased from 0.5% a year in the 1990s to 4.8% in the last four years.
Estimating the path of income convergence is an empirically challenging task, but our simple model based on growth rates and population dynamics provides useful insights and reasonable accuracy. Full income convergence is not necessary at this stage, or even at the time of accession. Hence, we instead focus on two alternative scenarios — uninterrupted accession process towards full membership or prolonged “Europeanisation” with no membership status. In our “accession” scenario, Turkey’s trend GDP growth would reach 7.5% a year, as opposed to 2.5% in Europe, thanks to the rising share of the qualified workforce and capital inflows. That would bring per capita income from 29.8% of the EU-25 average in 2005 to 48.5% (even excluding the likely revision in national accounts) by 2015. In our “sub-optimal” scenario, negotiations would fail, but “Europeanisation” would continue, albeit slower and with higher political risks. Trend GDP growth would be only 4.5% and leave Turkey lagging behind China and India. All in all, we still believe that the likelihood of an absolute breakdown of Turkey’s relations with Europe is negligible and the accession process, though more challenging than for other candidates, will help accelerate the speed of income convergence.
Important Disclosure Information at the end of this Forum
Turkey: Looking Beyond the Wall of Noise
Serhan Cevik | London
Turkey is moving into an election cycle, but we should look beyond the wall of noise. It is the time of the year when we update our economic analysis and roll out new projections looking into 2008. However, before we even get there, a challenging period of elections and global fears will greet us next year. Turkey has so far enjoyed an unprecedented era of uninterrupted expansion and become the fastest growing OECD country in the last five years. But as the burst of global volatility earlier this year reminded us, it has a troubling exposure to liquidity-driven capital flows and remains sensitive to noise and global sentiment. One of the main sources of market noise next year will be the country’s political cycle, starting with a presidential election in May and then general elections in November. We will regularly survey the political landscape over the coming months, but for now we believe that political developments (including the EU accession process) are unlikely to unsettle the favourable business cycle. And on the external front, although global imbalances may result in bursts of financial volatility, Turkey is less vulnerable to a US-led global slowdown (see When Atlas Sneezes, October 25, 2006). All in all, Morgan Stanley’s forecasts point to a mild correction in global GDP growth from 5% in 2006 to 4.3% next year and then 4.5% in 2008. Furthermore, the projected strength of Europe should keep the composition of growth favourable to the Turkish economy, given its extensive links to the continent.
Macroeconomic normalisation reflects fundamental improvements, in our view. On our estimates, Turkey will continue growing faster than the global economy in the coming years. We expect real GDP growth to slow from 7.4% in 2005 and 5.8% in 2006 to 5.6% next year, but reaccelerate to 7.2% in 2008. In our view, tighter financial conditions and slow recovery in real disposable income growth will moderate domestic demand growth, as the rate of increase in consumer spending eases from 8.8% in 2005 to 5.3% in 2006 and 4.4% next year. However, we are confident about income generation and financial penetration over the medium term, and thus expect private consumption to grow 6.2% in 2008. On the other hand, investment spending is more sensitive to transitory shocks and exhibits higher volatility. As a result, the annual growth rate of gross fixed investment expenditures is likely to lose pace from 24% in 2005 to 13.2% in 2006 and 7.5% next year. But we see this deceleration as a healthy sign of consolidation after a 104% cumulative increase in the past four years, and we expect a 12.8% increase in 2008. Overall, while domestic demand moderates toward a more balanced growth path, the rise in exports should support the economy and even help bring stabilisation in the current account.
Inflation should remain high in the first half of next year, but then start declining. The Turkish economy, albeit standing on stronger footing, still faces a number of challenges — mainly stemming from exogenous factors (like higher energy prices) and domestic excesses that emerge during the normalisation phase. In our view, the best policy anchor to manage these risks is the correction of fiscal imbalances. And thanks to prudent policies, the budget deficit has already narrowed from 15.2% of GDP in 2001 to about 1.2% this year, making the Treasury a net debt payer for the first time ever. The marked reduction in the public sector’s dis-saving rate not only improves debt dynamics but also supports the disinflation process. This is why we prefer looking beyond short-term volatility and focusing on fundamental drivers of the secular shift toward price stability. With sustained productivity gains that have outpaced wage growth and expanded the country’s supply frontier, we expect inflation to decline from 9.8% in 2006 to 5.8% by the end of next year and 3.6% in 2008.
The extent of monetary easing should be limited next year but accelerate in 2008. In our view, the Central Bank of Turkey will keep interest rates unchanged in the next six months, as it has to bring disinflation — firmly and visibly — back on track. Once inflation starts moving toward the “uncertainty” range, the authorities should be in a position to ease their monetary stance by 150 basis points in the second half of 2007 and 300 bps in 2008. That may not be immediately exciting for financial markets, but we think maintaining stability in a challenging year would be priceless, nonetheless.
Turkey: The Real Stake of Turkey-EU Negotiations
Serhan Cevik and Eric Chaney | London
We need to put Turkey’s relations with the European Union into a historical context, before analysing its convergence path. The process of “Europeanisation” started centuries ago during the Ottoman Empire, with the realisation of scientific and institutional progress in the west. But it really accelerated to a revolutionary pace in the early decades of modern republic under the reign of Ataturk, overhauling archaic institutions and bringing economic rejuvenation to the agrarian society. Unfortunately, despite such significant progress, a dreadful sense of inertia descended over the country, and political frictions slowed institutional modernisation. Consequently, although Turkey applied for associate membership status in the European Economic Community in 1959, the EU waited until 1999 to confirm the candidacy status and until 2005 to start accession negotiations. Nevertheless, Turkey’s difficult relations with the EU have always played a fundamental role in its institutional and economic development.
Bringing political and economic institutions into line with European standards will transform Turkey’s economy and social standing, but it would be naïve to expect accession talks to be straightforward, without any challenges. The experience of the last twelve months is an obvious case in point. First, despite the encouraging steps forward in recent years, Turkey still has a long list of political and socio-economic requirements to complete. Second, Europe’s enlargement fatigue and the unresolved Cyprus conflict will keep obstructing Turkey’s accession process, even if Turkey meets all the conditions without any delay. Indeed, Turkey’s membership aspirations have always been an important feature in the “widening versus deepening” debate in Europe, but the prevailing rhetoric suggests a deeper resistance to further integration and enlargement. In our view, these underlying shifts in Europe’s political climate are likely to place new stumbling blocks (such as the argument on the Union’s absorption capacity) in front of Turkey’s accession process.
One of the major concerns is the income inequality between Turkey and the EU and regional income disparities within Turkey. Turkey’s per capita GDP in purchasing power standards was just 29.8% of the EU-25 average in 2005, even below Bulgaria (31.9%) and Romania (32.9%). Furthermore, although the latest figure represents a 16% increase from the country’s relative income level of 25.7% in 2001, it is still below the average of 30.5% in the 1990s. As a result, Europeans perceive Turkey’s young and growing population as a threat that could lead to a wave of immigration. However, we believe that such figures alone are not enough to reach a gloomy conclusion. As a matter of fact, an encouraging process of convergence is already underway and the Turkish economy should continue catching up with the EU over the medium term. Even in the near future, we are likely to see further improvements that would raise Turkey’s per capita income to 34.2% of the EU-25 average (or about 40% if we take into account the conversion of national accounts to the European standard) by the end of 2008.
Many fear Turkey’s growing population with an average age of 26.5, but we see it as a demographic gift that could help the country achieve faster convergence. After all, working-age population is the basis for employment and income growth. Turkey’s problem has always been the low level of employment limiting the speed of convergence. While the share of the working-age population in total population stands at 71.2% (compared to 64% in Europe), the number of employed is just 45% of the working-age population (compared to 63.8% in Europe). The employment rate is partly a function of the level of labour force participation, which unfortunately stands at 49.3% compared to 72% in Europe. However, if Turkey improves the state of the labour market and brings its employment rate to the European level, the number of employed could increase by almost 50%, or by 11.6 million workers. Put differently, Turkey can potentially create new jobs that would be approximately half of the entire employment in the ten new members of the EU. Given the significant difference between per capita GDP and per worker GDP, that would imply a level of per capita income that is already at about 50% of the EU-25 average, even with today’s figures. In other words, Turkey’s demographic characteristics that may look like a threat now are actually an indication of its great potential to accelerate the pace of income convergence.
Macroeconomic normalisation and structural changes have acted like a “technology shock” raising the rate of productivity growth to a higher plateau. And given the favourable demographic trends, we estimate Turkey’s potential growth rate at around 7.5% — three times the EU-25’s potential. Of course, having a great potential is no guarantee for catching up with the rest of Europe at an accelerated pace. Maintaining the actual growth rate close to the potential growth rate, without triggering inflation pressures, is a challenging task that requires prudent macro policies and, more importantly, a wide-ranging set of structural reforms to remove microeconomic bottlenecks. As discussed above, one of the important building blocks for such a scenario is improving the economy’s labour absorption capacity. Greater flexibility in the labour market, together with the rationalisation of the tax regime and bureaucracy, would certainly help accelerate job creation and reduce inefficiencies in traditional sectors of the economy. For example, gross value added per worker in the agriculture sector is less than one-third of those figures for services and manufacturing sectors. In other words, sectoral productivity differentials (reflecting structural problems) also explain regional income disparities and the low level of per capita income relative to the EU average. Therefore, by improving labour-market conditions, Turkey can enhance its potential growth rate and keep its actual growth rate close to its potential.
Turkey may have the potential to boost employment growth, but that is not an automatic process even with more flexible labour-market regulations. Educational attainments are crucial, especially in today’s global economy. Even though we have seen a steady improvement over the years that will no doubt make the next generation of workers better equipped, Turkey’s human capital endowment remains low compared to other countries. For example, the share of the adult population with upper secondary education is 25% in Turkey, as opposed to the OECD average of 56%. This is partly a result of “gender gap” in educational attainments that also leads to an unusually low female participation in the labour force. Therefore, Turkey needs a comprehensive strategy to improve human capital endowment across the board. That is of course necessary but not sufficient to achieve higher productivity and income growth. After all, labour productivity depends on the capital-to-labour ratio and total factor productivity, not just the quality of human capital.
Even though fiscal consolidation and restructurings in the banking sector have led to a better allocation of capital, domestic savings are inadequate to finance Turkey’s investment requirements. This is why it needs a sustained increase in foreign direct investment, which had remained at an annual average of $720 million (or 0.4% of GDP) and accounted for a mere 2% of capital spending between 1985 and 2003. But that was not surprising, given macroeconomic volatility and structural limitations keeping foreign firms away from the Turkish market. The good news is that macroeconomic normalisation and institutional improvements in the investment climate have already led to a breakthrough in FDI flows — surging to $9.8 billion (or 2.7% of GDP) in 2005 and around $20 billion (or 5.2%) this year. Obviously, the EU accession process plays an important role in attracting FDI and therefore accelerating productivity growth. It has happened in numerous other countries, and Turkey should enjoy a similar injection of low-cost capital with positive externalities. Coupled with higher educational attainments, the FDI-driven accumulation of new technologies and know-how would support the rise in total factor productivity growth, which already increased from 0.5% a year in the 1990s to 4.8% in the last four years.
Estimating the path of income convergence is an empirically challenging task, but our simple model based on growth rates and population dynamics provides useful insights and reasonable accuracy. Full income convergence is not necessary at this stage, or even at the time of accession. Hence, we instead focus on two alternative scenarios — uninterrupted accession process towards full membership or prolonged “Europeanisation” with no membership status. In our “accession” scenario, Turkey’s trend GDP growth would reach 7.5% a year, as opposed to 2.5% in Europe, thanks to the rising share of the qualified workforce and capital inflows. That would bring per capita income from 29.8% of the EU-25 average in 2005 to 48.5% (even excluding the likely revision in national accounts) by 2015. In our “sub-optimal” scenario, negotiations would fail, but “Europeanisation” would continue, albeit slower and with higher political risks. Trend GDP growth would be only 4.5% and leave Turkey lagging behind China and India. All in all, we still believe that the likelihood of an absolute breakdown of Turkey’s relations with Europe is negligible and the accession process, though more challenging than for other candidates, will help accelerate the speed of income convergence.
Important Disclosure Information at the end of this Forum
Turkey: Looking Beyond the Wall of Noise
Serhan Cevik | London
Turkey is moving into an election cycle, but we should look beyond the wall of noise. It is the time of the year when we update our economic analysis and roll out new projections looking into 2008. However, before we even get there, a challenging period of elections and global fears will greet us next year. Turkey has so far enjoyed an unprecedented era of uninterrupted expansion and become the fastest growing OECD country in the last five years. But as the burst of global volatility earlier this year reminded us, it has a troubling exposure to liquidity-driven capital flows and remains sensitive to noise and global sentiment. One of the main sources of market noise next year will be the country’s political cycle, starting with a presidential election in May and then general elections in November. We will regularly survey the political landscape over the coming months, but for now we believe that political developments (including the EU accession process) are unlikely to unsettle the favourable business cycle. And on the external front, although global imbalances may result in bursts of financial volatility, Turkey is less vulnerable to a US-led global slowdown (see When Atlas Sneezes, October 25, 2006). All in all, Morgan Stanley’s forecasts point to a mild correction in global GDP growth from 5% in 2006 to 4.3% next year and then 4.5% in 2008. Furthermore, the projected strength of Europe should keep the composition of growth favourable to the Turkish economy, given its extensive links to the continent.
Macroeconomic normalisation reflects fundamental improvements, in our view. On our estimates, Turkey will continue growing faster than the global economy in the coming years. We expect real GDP growth to slow from 7.4% in 2005 and 5.8% in 2006 to 5.6% next year, but reaccelerate to 7.2% in 2008. In our view, tighter financial conditions and slow recovery in real disposable income growth will moderate domestic demand growth, as the rate of increase in consumer spending eases from 8.8% in 2005 to 5.3% in 2006 and 4.4% next year. However, we are confident about income generation and financial penetration over the medium term, and thus expect private consumption to grow 6.2% in 2008. On the other hand, investment spending is more sensitive to transitory shocks and exhibits higher volatility. As a result, the annual growth rate of gross fixed investment expenditures is likely to lose pace from 24% in 2005 to 13.2% in 2006 and 7.5% next year. But we see this deceleration as a healthy sign of consolidation after a 104% cumulative increase in the past four years, and we expect a 12.8% increase in 2008. Overall, while domestic demand moderates toward a more balanced growth path, the rise in exports should support the economy and even help bring stabilisation in the current account.
Inflation should remain high in the first half of next year, but then start declining. The Turkish economy, albeit standing on stronger footing, still faces a number of challenges — mainly stemming from exogenous factors (like higher energy prices) and domestic excesses that emerge during the normalisation phase. In our view, the best policy anchor to manage these risks is the correction of fiscal imbalances. And thanks to prudent policies, the budget deficit has already narrowed from 15.2% of GDP in 2001 to about 1.2% this year, making the Treasury a net debt payer for the first time ever. The marked reduction in the public sector’s dis-saving rate not only improves debt dynamics but also supports the disinflation process. This is why we prefer looking beyond short-term volatility and focusing on fundamental drivers of the secular shift toward price stability. With sustained productivity gains that have outpaced wage growth and expanded the country’s supply frontier, we expect inflation to decline from 9.8% in 2006 to 5.8% by the end of next year and 3.6% in 2008.
The extent of monetary easing should be limited next year but accelerate in 2008. In our view, the Central Bank of Turkey will keep interest rates unchanged in the next six months, as it has to bring disinflation — firmly and visibly — back on track. Once inflation starts moving toward the “uncertainty” range, the authorities should be in a position to ease their monetary stance by 150 basis points in the second half of 2007 and 300 bps in 2008. That may not be immediately exciting for financial markets, but we think maintaining stability in a challenging year would be priceless, nonetheless.
Monday, January 29, 2007
Turkey Economy Posts
Serhan Cevik's MS GEF Posts:
A New Beginning
July 25, 2007
The Status Quo Barrier
July 20, 2007
Trillion Dollar Economy
July 19, 2007
Gains and Pains
July 12, 2007
Are Voters Rational?
July 10, 2007
Voting for the Future
June 26, 2007
Heat Wave
June 21, 2007
Turkey
The Istan-Bull Paradox
Food for Thought
June 06, 2007
The Power of Patience
May 30, 2007
Black Swans and the Surprise of 2007
May 24, 2007
The Politics of Misery and Expectations
May 17, 2007
A Perfect Mess
May 03, 2007
The Rise and (Slow) Fall of Inflation
April 24, 2007
Secrets Unveiled
April 19, 2007
Twilight Zone
May 09, 2007
The Litmus Test for Liberal Democracy
April 09, 2007
Breakeven Odds
April 02, 2007
Subprime Motives
March 22, 2007
A Tale of Two Curves
March 19, 2007
Oh, Chicken Licken, What Have You Done
March 13, 2007
A Survey of Inflation Risks
March 05, 2007
Pricing the Unexpected
February 12, 2007
The Downside of Being Attractive
February 01, 2007
Barrel by Barrel
January 25, 2007
Remembering Milton Friedman
January 11, 2007
Secrets of Investment Dynamics
November 23, 2006
Jobs for Votes
November 15, 2006
Structural Boom
Oct 24, 2006
The TFP Revolution
Oct 18, 2006
Productivity Cushion
Sept 15, 2006
Secrets of Consumption Dynamics
Sept 05, 2006
Normalising
Aug 31, 2006
Reality Check
Aug 24, 2006
Against Animal Spirits
Aug 22, 2006
Finding Common Sense
Aug 16, 2006
The Notorious Chicken-and-Egg Problem
Aug 15, 2006
Still GARCHing Ahead
Aug 08, 2006
Tax the Rich
Aug 08, 2006
Aftershocks
Aug 04, 2006
Marx's Ghost
Jul 17, 2006
The Mysterious Hunger Strike of Vegetarians
Jul 06, 2006
Seventeen Quarters and Counting
Jul 05, 2006
Lunch at Mandarin
Jun 29, 2006
Leading the Elephant
Jun 26, 2006
Money for Nothing?
Jun 23, 2006
A Fistful of Dollars
15/06/2006
The Contagion of Mutual Imitation
14/06/2006
Commodity Bubble and the Lira
08/06/2006
Managing Fat-Tail Risks
06/06/2006
Volatility Trap
02/06/06
The Burden of Dirigisme
16/05/06
Bad News Bears
11/05/06
Productivity-Driven Monetary Policy
03/05/06
More Turm(oil)
27/04/06
Listen to Gaia
19/04/06
Adjustment Pain
11/04/06
Productivity Revival
30/03/06
Politicising the Central Bank27/03/06
What You Should Never Lose
23/03/2006
Walk the Line
15/03/06
Less Miserables
09/03/06
Of Lemons and Dinosaurs
02/03/06
Urban Recovery, Rural Poverty
17/02/06
Misreadings
10/02/06
Chain Reaction
18/01/06
Loving IT (Inflation Targeting)
16/01/06
From Copenhagen to Maastricht
11/01/06
Post-Industrial Bottleneck
11/01/06
Targets of Inflation Targeting
04/01/06
CA Deficit Big Picture
07/12/05
Fading Memory of Inflation
05/12/05
Pie in the Sky
23/11/05
The End of Fiscal Dominance
08/11/05
Waking up to a (pensions) Nightmare
25/10/05
Saving (for) the Future
20/10/05
Quod Differtur Non Aufertur (pensions)
19/10/05
Moving Beyond Clouds
13/10/05
Of Taxes and Ferraris
11/10/05
If You Follow Me, I Will Follow You
10/10/05
I Know What You Wrote Last Summer
06/10/05
Fat Tails Slimming
05/10/05
Fear and Loathing in Europe04/10/05
Adventures on the Production Frontier
28/09/05
Normal Actually
21/09/05
Rationalisation
19/09/05
Energy Shock in a Flat World
14/09/05
The Wisdom of Dr. Strangelove
12/09/05
The Flap of a Butterfly's Wings
06/09/05
If You Want to Create Jobs........
02/09/05
Blinding Noise
01/09/05
Unleashing the Power of Globalisation
23/08/05
Schumacher's Gift (tourism)
18/08/05
The Art of Being Wise
17 /08/05
Payback from Globalisation
10/08/05
The Next Wave of Disinflation
04/08/05
The Floating Chinese Puzzle
01/08/05
Fruits of Normalisation
27/07/05
Unlocking Schrodinger's Cat
20/07/05
The Age of Stability
07/07/05
The Silence of Lambs
05/07/05
The Machine Fetish
29/06/05
Size Matters
22/06/05
Spectacularly Normal
21/06/05
Wheels of Fortune
15/06/05
Pollyanna's Revenge
09/06/05
Making Poverty History
08/06/05
What Developed Can Learn From Developing
02/06/05
Technological Sclerosis Productivity Divergence
20/04/05
The Next Wave
19/04/05
A New Beginning
July 25, 2007
The Status Quo Barrier
July 20, 2007
Trillion Dollar Economy
July 19, 2007
Gains and Pains
July 12, 2007
Are Voters Rational?
July 10, 2007
Voting for the Future
June 26, 2007
Heat Wave
June 21, 2007
Turkey
The Istan-Bull Paradox
Food for Thought
June 06, 2007
The Power of Patience
May 30, 2007
Black Swans and the Surprise of 2007
May 24, 2007
The Politics of Misery and Expectations
May 17, 2007
A Perfect Mess
May 03, 2007
The Rise and (Slow) Fall of Inflation
April 24, 2007
Secrets Unveiled
April 19, 2007
Twilight Zone
May 09, 2007
The Litmus Test for Liberal Democracy
April 09, 2007
Breakeven Odds
April 02, 2007
Subprime Motives
March 22, 2007
A Tale of Two Curves
March 19, 2007
Oh, Chicken Licken, What Have You Done
March 13, 2007
A Survey of Inflation Risks
March 05, 2007
Pricing the Unexpected
February 12, 2007
The Downside of Being Attractive
February 01, 2007
Barrel by Barrel
January 25, 2007
Remembering Milton Friedman
January 11, 2007
Secrets of Investment Dynamics
November 23, 2006
Jobs for Votes
November 15, 2006
Structural Boom
Oct 24, 2006
The TFP Revolution
Oct 18, 2006
Productivity Cushion
Sept 15, 2006
Secrets of Consumption Dynamics
Sept 05, 2006
Normalising
Aug 31, 2006
Reality Check
Aug 24, 2006
Against Animal Spirits
Aug 22, 2006
Finding Common Sense
Aug 16, 2006
The Notorious Chicken-and-Egg Problem
Aug 15, 2006
Still GARCHing Ahead
Aug 08, 2006
Tax the Rich
Aug 08, 2006
Aftershocks
Aug 04, 2006
Marx's Ghost
Jul 17, 2006
The Mysterious Hunger Strike of Vegetarians
Jul 06, 2006
Seventeen Quarters and Counting
Jul 05, 2006
Lunch at Mandarin
Jun 29, 2006
Leading the Elephant
Jun 26, 2006
Money for Nothing?
Jun 23, 2006
A Fistful of Dollars
15/06/2006
The Contagion of Mutual Imitation
14/06/2006
Commodity Bubble and the Lira
08/06/2006
Managing Fat-Tail Risks
06/06/2006
Volatility Trap
02/06/06
The Burden of Dirigisme
16/05/06
Bad News Bears
11/05/06
Productivity-Driven Monetary Policy
03/05/06
More Turm(oil)
27/04/06
Listen to Gaia
19/04/06
Adjustment Pain
11/04/06
Productivity Revival
30/03/06
Politicising the Central Bank27/03/06
What You Should Never Lose
23/03/2006
Walk the Line
15/03/06
Less Miserables
09/03/06
Of Lemons and Dinosaurs
02/03/06
Urban Recovery, Rural Poverty
17/02/06
Misreadings
10/02/06
Chain Reaction
18/01/06
Loving IT (Inflation Targeting)
16/01/06
From Copenhagen to Maastricht
11/01/06
Post-Industrial Bottleneck
11/01/06
Targets of Inflation Targeting
04/01/06
CA Deficit Big Picture
07/12/05
Fading Memory of Inflation
05/12/05
Pie in the Sky
23/11/05
The End of Fiscal Dominance
08/11/05
Waking up to a (pensions) Nightmare
25/10/05
Saving (for) the Future
20/10/05
Quod Differtur Non Aufertur (pensions)
19/10/05
Moving Beyond Clouds
13/10/05
Of Taxes and Ferraris
11/10/05
If You Follow Me, I Will Follow You
10/10/05
I Know What You Wrote Last Summer
06/10/05
Fat Tails Slimming
05/10/05
Fear and Loathing in Europe04/10/05
Adventures on the Production Frontier
28/09/05
Normal Actually
21/09/05
Rationalisation
19/09/05
Energy Shock in a Flat World
14/09/05
The Wisdom of Dr. Strangelove
12/09/05
The Flap of a Butterfly's Wings
06/09/05
If You Want to Create Jobs........
02/09/05
Blinding Noise
01/09/05
Unleashing the Power of Globalisation
23/08/05
Schumacher's Gift (tourism)
18/08/05
The Art of Being Wise
17 /08/05
Payback from Globalisation
10/08/05
The Next Wave of Disinflation
04/08/05
The Floating Chinese Puzzle
01/08/05
Fruits of Normalisation
27/07/05
Unlocking Schrodinger's Cat
20/07/05
The Age of Stability
07/07/05
The Silence of Lambs
05/07/05
The Machine Fetish
29/06/05
Size Matters
22/06/05
Spectacularly Normal
21/06/05
Wheels of Fortune
15/06/05
Pollyanna's Revenge
09/06/05
Making Poverty History
08/06/05
What Developed Can Learn From Developing
02/06/05
Technological Sclerosis Productivity Divergence
20/04/05
The Next Wave
19/04/05
Saturday, September 09, 2006
Migration
NUMBER OF ARRIVING-DEPARTING FOREIGNERS AND CITIZENS, JULY 2007
A 16,5% increase for arriving foreigners of Turkey is examined when compared with the previous years’ same month.
According to provisional figures which source of data is General Directorate of Security, in the month of July 2007, 16,5 % increase for arriving foreigners of Turkey is examined as
3 624 156 when compared with the previous years’ same the month. It was 3 109 727 in previous years’ same the month.
In the month of July 2007, 18,7% increase for departing foreigners of Turkey is examined as 3 010 266. It was 2 535 376 in previous years’ same the month.
June 2007
According to provisional figures which source of data is General Directorate of Security, in the month of June 2007, 17,1 % increase for arriving foreigners of Turkey is examined as 2 774 076 when compared with the previous years’ same the month. It was 2 368 628 in previous years’ same the month.
In the month of June 2007, 18,5% increase for departing foreigners of Turkey is examined as 2 457 171. It was 2 072 720 in previous years’ same the month.
May
According to provisional figures which source of data is General Directorate of Security, in the month of May 2007, 19,2 % increase for arriving foreigners of Turkey is examined as 2 287 645 when compared with the previous years’ same the month. It was 1 918 809 in previous years’ same the month.
In the month of May 2007, 20% increase for departing foreigners of Turkey is examined as 1 994 216. It was 1 662 413 in previous years’ same the month.
April
According to provisional figures which source of data is General Directorate of Security, in the month of April 2007, 10,8 % increase for arriving foreigners of Turkey is examined as 1 520 954 when compared with the previous years’ same the month. It was 1 372 922 in previous years’ same the month. In the month of April 2007, 12,7% increase for departing foreigners of Turkey is examined as 1 326 008. It was 1 176 916 in previous years’ same the month.
March
According to provisional figures which source of data is General Directorate of Security, in the month of March 2007, 19,3% increase for arriving foreign visitors of Turkey is examined as 1 099 960 when compared with the previous years’ same the month. It was 921 892 in previous years’ same the month.
In the month of March 2007, 20,8% increase for departing foreign visitors of Turkey is examined as 1 004 452. It was 831 622 in previous years’ same the month.
February
According to provisional figures which source of data is General Directorate of Security, in the month of February 2007, 25,6% increase for arriving foreign visitors of Turkey is examined as 787 048 when compared with the previous years’ same the month. It was 626 565 in previous years’ same the month.
In the month of February 2007, 24,7% increase for departing foreign visitors of Turkey is examined as 738 497. It was 592 362 in previous years’ same the month.
January
According to provisional figures which source of data is General Directorate of Security, in the month of January 2007, 7,1% increase for arriving foreign visitors of Turkey is examined as 714 425 when compared with the previous years’ same the month. It was 667 337 in previous years’ same the month.
In the month of January 2007, 13,3% increase for departing foreign visitors of Turkey is examined as 809 424. It was 714 502 in previous years’ same the month.
December 2006
According to provisional figures which source of data is General Directorate of Security, in the month of December 2006, 7,6% increase for arriving foreign visitors of Turkey is examined as 926 968 when compared with the previous years’ same the month. It was 861 836 in previous years’ same the month.
In the month of December 2006, 12,1% increase for departing foreign visitors of Turkey is examined as 880 439. It was 785 685 in previous years’ same the month.
November
According to provisional figures which source of data is General Directorate of Security, in the month of November 2006, 3,1% decrease for arriving foreign visitors of Turkey is examined as 1 020 106 when compared with the previous years’ same the month. It was 1 052 561 in previous years’ same the month.
In the month of November 2006, 3,6% decrease for departing foreign visitors of Turkey is examined as 1 085 716 . It was 1 126 199 in previous years’ same the month.
October
According to provisional figures which source of data is General Directorate of Security, in the month of October 2006, 18,7% decrease for arriving foreign visitors of Turkey is examined as 1 713 916 when compared with the previous years’ same the month. It was 2 108 398 in previous years’ same the month.
In the month of October 2006, 19,9% decrease for departing foreign visitors of Turkey is examined as 1 957 609 . It was 2 442 735 in previous years’ same the month.
September
According to provisional figures which source of data is General Directorate of Security, in the month of September 2006, 9,4% decrease for arriving foreign visitors of Turkey is examined as 2 267 146 persons when compared with the previous years’ same the month. It was 2 502 123 persons in previous years’ same the month.
In the month of September 2006, 3,2% decrease for departing foreign visitors of Turkey is examined as 2 496 134 persons. It was 2 577 429 persons in previous years’ same the month.
August
According to provisional figures which source of data is General Directorate of Security, in the month of August 2006, 1,6% increase for arriving foreign visitors of Turkey is examined as 2 905 817 persons when compared with the previous years’ same the month. It was 2 861 141 persons in previous years’ same the month.
In the month of August 2006, 0,3% increase for departing foreign visitors of Turkey is examined as 3 270 139 persons. It was 3 259 788 persons in previous years’ same the month.
July
According to provisional figures which source of data is General Directorate of Security, in the month of July 2006, 2,2% decrease for arriving foreign visitors of Turkey is examined as 3 109 727 persons when compared with the previous years’ same the month. It was 3 180 802 persons in previous years’ same the month.
In the month of July 2006, 3% decrease for departing foreign visitors of Turkey is examined as 2 535 376 persons. It was 2 164 734 persons in previous years’ same the month.
A 16,5% increase for arriving foreigners of Turkey is examined when compared with the previous years’ same month.
According to provisional figures which source of data is General Directorate of Security, in the month of July 2007, 16,5 % increase for arriving foreigners of Turkey is examined as
3 624 156 when compared with the previous years’ same the month. It was 3 109 727 in previous years’ same the month.
In the month of July 2007, 18,7% increase for departing foreigners of Turkey is examined as 3 010 266. It was 2 535 376 in previous years’ same the month.
June 2007
According to provisional figures which source of data is General Directorate of Security, in the month of June 2007, 17,1 % increase for arriving foreigners of Turkey is examined as 2 774 076 when compared with the previous years’ same the month. It was 2 368 628 in previous years’ same the month.
In the month of June 2007, 18,5% increase for departing foreigners of Turkey is examined as 2 457 171. It was 2 072 720 in previous years’ same the month.
May
According to provisional figures which source of data is General Directorate of Security, in the month of May 2007, 19,2 % increase for arriving foreigners of Turkey is examined as 2 287 645 when compared with the previous years’ same the month. It was 1 918 809 in previous years’ same the month.
In the month of May 2007, 20% increase for departing foreigners of Turkey is examined as 1 994 216. It was 1 662 413 in previous years’ same the month.
April
According to provisional figures which source of data is General Directorate of Security, in the month of April 2007, 10,8 % increase for arriving foreigners of Turkey is examined as 1 520 954 when compared with the previous years’ same the month. It was 1 372 922 in previous years’ same the month. In the month of April 2007, 12,7% increase for departing foreigners of Turkey is examined as 1 326 008. It was 1 176 916 in previous years’ same the month.
March
According to provisional figures which source of data is General Directorate of Security, in the month of March 2007, 19,3% increase for arriving foreign visitors of Turkey is examined as 1 099 960 when compared with the previous years’ same the month. It was 921 892 in previous years’ same the month.
In the month of March 2007, 20,8% increase for departing foreign visitors of Turkey is examined as 1 004 452. It was 831 622 in previous years’ same the month.
February
According to provisional figures which source of data is General Directorate of Security, in the month of February 2007, 25,6% increase for arriving foreign visitors of Turkey is examined as 787 048 when compared with the previous years’ same the month. It was 626 565 in previous years’ same the month.
In the month of February 2007, 24,7% increase for departing foreign visitors of Turkey is examined as 738 497. It was 592 362 in previous years’ same the month.
January
According to provisional figures which source of data is General Directorate of Security, in the month of January 2007, 7,1% increase for arriving foreign visitors of Turkey is examined as 714 425 when compared with the previous years’ same the month. It was 667 337 in previous years’ same the month.
In the month of January 2007, 13,3% increase for departing foreign visitors of Turkey is examined as 809 424. It was 714 502 in previous years’ same the month.
December 2006
According to provisional figures which source of data is General Directorate of Security, in the month of December 2006, 7,6% increase for arriving foreign visitors of Turkey is examined as 926 968 when compared with the previous years’ same the month. It was 861 836 in previous years’ same the month.
In the month of December 2006, 12,1% increase for departing foreign visitors of Turkey is examined as 880 439. It was 785 685 in previous years’ same the month.
November
According to provisional figures which source of data is General Directorate of Security, in the month of November 2006, 3,1% decrease for arriving foreign visitors of Turkey is examined as 1 020 106 when compared with the previous years’ same the month. It was 1 052 561 in previous years’ same the month.
In the month of November 2006, 3,6% decrease for departing foreign visitors of Turkey is examined as 1 085 716 . It was 1 126 199 in previous years’ same the month.
October
According to provisional figures which source of data is General Directorate of Security, in the month of October 2006, 18,7% decrease for arriving foreign visitors of Turkey is examined as 1 713 916 when compared with the previous years’ same the month. It was 2 108 398 in previous years’ same the month.
In the month of October 2006, 19,9% decrease for departing foreign visitors of Turkey is examined as 1 957 609 . It was 2 442 735 in previous years’ same the month.
September
According to provisional figures which source of data is General Directorate of Security, in the month of September 2006, 9,4% decrease for arriving foreign visitors of Turkey is examined as 2 267 146 persons when compared with the previous years’ same the month. It was 2 502 123 persons in previous years’ same the month.
In the month of September 2006, 3,2% decrease for departing foreign visitors of Turkey is examined as 2 496 134 persons. It was 2 577 429 persons in previous years’ same the month.
August
According to provisional figures which source of data is General Directorate of Security, in the month of August 2006, 1,6% increase for arriving foreign visitors of Turkey is examined as 2 905 817 persons when compared with the previous years’ same the month. It was 2 861 141 persons in previous years’ same the month.
In the month of August 2006, 0,3% increase for departing foreign visitors of Turkey is examined as 3 270 139 persons. It was 3 259 788 persons in previous years’ same the month.
July
According to provisional figures which source of data is General Directorate of Security, in the month of July 2006, 2,2% decrease for arriving foreign visitors of Turkey is examined as 3 109 727 persons when compared with the previous years’ same the month. It was 3 180 802 persons in previous years’ same the month.
In the month of July 2006, 3% decrease for departing foreign visitors of Turkey is examined as 2 535 376 persons. It was 2 164 734 persons in previous years’ same the month.
Wednesday, August 18, 2004
Turkey's 'Economic Miracle'
Leaving aside political considerations (I would certainly fast-track Turkey's EU accession process for many, many reasons), the economic attraction of Turkey as an EU member state is rapidly making itself felt. Just look at these numbers from Morgan Stanley's Cerhan Sevic:
The other interesting point would be to ask why it is that Turkey is apparently so succesful, even in comparison to the other new EU accession states (and without all the aid). I would suspect that demography has something to do with it, but then I imagine most of you could already have guessed I was going to say that :).
According to our estimates, Turkey?s overall productivity growth accelerated from an average of 2.1% a year in the 1990s (or an average of 3% in the 1960-2000 period) to an average of 8.8% in the last three years. The trend growth rate also increased from 2.3% in the 1990s (and 3.1% in the 1960-2000 period) to 5.8% in the post-crisis era. The productivity acceleration is even more pronounced in the business sector. The rate of non-farm labour productivity growth rose to an average of 9.5% per annum in the last three years, from 2.2% in the 1990s and 2.4% in the 1980-2000 period. The underlying trend growth rate improved from 2.4% in the 1990s to 6.3% in the last three years and 7.4% this year. Moreover, according to the State Institute of Statistics? estimates, the average annualised rate of increase in real output per person in the manufacturing sector during the 2001-2004 period has been 10.2%, compared with 3.8% in the 1990s. In other words, output per worker in the manufacturing sector has increased by a cumulative rate of 30.4%, as the trend growth rate jumped to 7.5% in the last three years.Now with everything appearing to be so wonderfully lacklustre all over the eurozone, you might have thought an economy with an underlying trend growth rate of 6.3% and rising would be worth taking very seriously indeed.
The other interesting point would be to ask why it is that Turkey is apparently so succesful, even in comparison to the other new EU accession states (and without all the aid). I would suspect that demography has something to do with it, but then I imagine most of you could already have guessed I was going to say that :).
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