1

Turkish economy

• Brief economic history

• Economic policies

• Main features of the economy

• Recent macroeconomic indicators

• Towards a new agenda

2

• Regular boom-and-bust economic cycles since the 1950s

• Excessive budgetary expenditures and chronic inflation

• Very high interest rates

• Major economic crises in 1994, 1998 and 2000-2001

• Devastating 1999 earthquake and 2000-2001 crisis

Brief Economic History

3

• Signed a customs union with the European Union (EU) in 1995

• Became a pre-accession candidate for EU membership at the Helsinki Summit in December 1999

Brief Economic History

4

• Modern

• Participatory democracy

• Full integration in Europe

• A critical role in its region

• An export-oriented, technology-intensive production structure

Economic Policies

• Open economy

• Capital flows are free

• No exchange rate restrictions for investors

5

• A tough IMF program

• Undercapitalized banks seized, shut down or privatized

• Energy and telecommunications’ markets liberalized

• Independent banking regulator created in 2001

Economic Policies

6

• Population of 73 million

• GNP USD 363 billion and income per capita with USD 4,710

• Long term average growth rate is about 5 percent

• Services and industry have shares of 64 percent and 23 percent

Main features of the economy

Source: World Bank

7

• Unemployment rate is about 10 percent

• Exports and imports amount to 90 billions and 127 billions, respectively.

• The main trade partner is the EU with 50 percent share

Main features of the economy

Source: World Bank

8

Recent Macroeconomic Indicators

• Since 2002, impressive macro-economic performance

• Single-digit inflation after 35 years

CPI INFLATION (%)

68.5

29.7

18.49.32 7.72 9.65

0

20

40

60

80

2001 2002 2003 2004 2005 2006

GNP GROWTH (%)

-9.5

7.95.9

9.97.6

6

- 15

- 10

- 5

0

5

10

15

2001 2002 2003 2004 2005 2006

Source: World Bank

9

Recent Macroeconomic Indicators

CURRENT ACCOUNT BALANCE/GNP (%)

2.4

-0.8

-3.4

-5.2-6.4

-7.9- 10

- 8

- 6

- 4

- 2

0

2

4

2001 2002 2003 2004 2005 2006

EXTERNAL DEBT (billion $)

113130

144160 168

207

0

50

100

150

200

250

2001 2002 2003 2004 2005 2006

• However, transformation also brings about some inherent

risks

Source: World Bank

10

Recent Macroeconomic Indicators

TOTAL POPULATI ON (%)

46.6 47.5

5.9

0

10

20

30

40

50

0- 24 25- 64 65>

Ag

e

• Growth in recent years has been generating new jobs. But, it’s not been enough to lower unemployment rate.

• Declining share of agriculture

• Rising working age populationRisk generating factors

Source: Eurostat and Turkish Statistics Instutite

UNEMPLOYMENT RATE (%)

8.4

10.3 10.5 10.3 10.3 9.9

0

2

4

6

8

10

12

2001 2002 2003 2004 2005 2006

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Recent Macroeconomic Indicators

• Significant increase in Foreign Direct Investment

FDI (million $)

2771830 1253 2024

8726

19234

0

5000

10000

15000

20000

25000

2001 2002 2003 2004 2005 2006

TOTAL NET DEBT (% of GNP)

90.578.5

70.463.5

55.344.8

0

20

40

60

80

100

2001 2002 2003 2004 2005 2006

• Decreasing total debt ratio

Source: World Bank

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Towards a New Agenda

Picture is not bad at all

Recent growth performance

Macroeconomic stability

A new and healthy incentive structure

Global integration with also growing regional integration

However,

risks are serious and require competent management

Current account deficit

High unemployment

There is an urgent need for a new agenda

Setting the priorities, strategic action plans, effective delivery

Managing the EU process as a mechanism to mitigate risks

Building the required capacity for the new environment

Reducing inequality through equitable human and social development

Creating more and better jobs

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Turkish economy

Absolute independence can just come true by the aid of economic independence..

Kemal ATATURK Founder of Turkish

Republic

1881-1938

14

Turkish economy

THANK YOU…

QUESTIONS??