Download Macroeconomic Developments and Future Prospects Central Bank of The Republic of Turkey

Macroeconomic Developments
and Future Prospects
Central Bank of
The Republic of Turkey
Erdem Başçı
Vice Governor
December 17, 2007
TUSIAD – CEPII Seminar
Paris
1
Outline
1)
1) Turkish
Turkish Economy
Economy –– the
the Past
Past and
and the
the Present
Present
2)
2) What
What Went
Went Right?
Right?
3)
3) Change
Change in
in Growth
Growth Dynamics
Dynamics
4)
4) What
What Needs
Needs to
to be
be Done?
Done?
2
Turkish Economy – The Past and The Present
Inflation and Growth Trends in Turkey
(1981-2006, percent)
1990-2001
9.5
2002-2007*
75
13.9 %
55
7.5
Inflation (CPI)
74.0 %
Inflation
(left axis)
35
GDP Growth
3.0 %
6.7 %
14.2 %
Industy Production Growth
3.8 %
7.4 %
Capacity Utilization
75.8 %
79.8 %
-5
1.5
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
3.1 %
3.5
Growth
(right axis)
15
Investment Growth
5.5
The Share of Turkish Exports in the World Total
(1950-2006, percent)
0.8
0.7
Non-Farm Employment
2.6 %
3.8 %
Liberalization and
export subsidy
policy period
Import substitution
policy period
0.6
0.5
Exports (USD)
8.8 %
23.2 %
0.4
Floating
exchange
rate period
0.3
Exports (Real)
9.4 %
14.5 %
0.2
Source: World Trade Organization, TURKSTAT
2005
2000
1995
1990
1985
1980
1975
1970
1965
1960
1955
1950
0.1
* As of 2007Q3
Source: TURKSTAT, CBRT
3
What Went Right?
100
89.4
77.7
80
Net Public Debt / GDP
69.7
63.7
55.2
60
45.0
(2001-2007Q3, percentage)
40
40.4
20
2001
2002
2003
2004
2005
2006
2007Q3
Source: Undersecretariat of Treasury
40
29.9
30
Credits to Private Sector / GDP
(2001-2007Q3, percentage)
20
32.2
25.1
18.7
17.9
11.7
14.0
10
0
2001
2002
2003
2004
2005
2006
2007
Source: CBRT
4
What Went Right?
Public Sector Borrowing Requirement (1975-2006)
20%
PSBR
15%
10%
5%
0%
-5%
-10%
PSBR (excluding debt
service)
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
-15%
Source: State Planning Organization
5
What Went Right?
Corporate Taxes (percent, 2007)
Source: OECD
6
What Went Right?
Economic Performance and Governance (2006)
Gross National Income per Capita
80000
70000
60000
50000
Norway
Governance Indicators:
Political Stability
Rule of Law
Voice and Accountability
Regulatory Quality
Government Effectiveness
Control Corruption
Denmark
Iceland
Ireland
Switzerland
USA
40000
Holland
Canada
France
30000
Germany
Japan
Italy
Sweden
Singapore
Greece
Hong Kong
Israel
20000
N. Zealand
Slovenia
Korea
Portugal
Czech Rep.
10000
0
Hungary
Venezuela
Russia
Argentina
China
Indonesia
Turkey
-8
-6
-4
Poor Governance
Mexico
Chile
Turkey 2006
2002
-2
0
Tunusia Malaysia
2
4
6
8
10
12
14
Good Governance
Trend line is y=a+bx+cx2 curve; y=GDP per capita and x=governance index.
Source: World Bank
7
What Went Right?
Turkey’s Place in Global Competition (2007)
140
125
131
117
120
Number of Countries
102
104
100
Turkey’s Ranking
80
60
40
49
48
42
40
53
36
53
40
59
44
75
59
80
65
65
66
71
59
54
53
40
20
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
0
Source: World Economic Forum, The Global Competitiveness Report 2007-2008
8
Change in Growth Dynamics
Sources of Growth
(average contribution, percent)
Period
Growth Rate*
Capital Stock
Labor
Total Factor
Productivity
Finland
1970-2000
3.1
18.7
0.4
69.3
Germany
1992-2000
1.7
12.2
-15.9
64.2
Sweden
1979-2000
2.2
36.8
4.9
63.5
France
1970-2000
2.6
62.2
-8.0
63.2
Denmark
1970-2000
2.5
49.0
14.4
61.7
Belgium
1970-2000
2.6
30.4
5.8
57.0
Italy
1980-2000
1.6
26.0
9.5
35.3
Japan
1970-2000
3.5
25.1
12.2
26.0
USA
1970-2000
3.1
33.8
40.5
25.1
Canada
1970-2000
3.2
40.5
49.0
18.7
1972-2000
4.1
69.2
19.5
11.3
2002-2006
6.6
52.7
3.1
44.2
Turkey
* Excluding indirect taxes on imports
Source: OECD; Saygılı, Cihan, and Yurtoğlu (2006)
9
Change in Growth Dynamics
Investments per Employee (constant prices)
5
• In the 1980s and 90s capital
deepening was observed in
services (mainly driven by
construction sector and
infrastructure investments).
• Investments in industry
remained flat.
Industry
4
Investments
in industry
have picked
up after 2001.
3
Services
2
1
Agriculture
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
0
Source: Saygılı, Cihan, and Yurtoğlu (2006)
10
Change in Growth Dynamics
Capital and Labor Productivity (relative to EU-7 average)
0.50
7
Productivity of
Capital (right)
0.45
Trend in labor productivity
shifted in 2001.
6
0.40
5
0.35
Labor productivity
(right)
4
0.30
0.25
3
Drop in productivity of capital was not due
to convergence to EU average, but
inefficiencies in the use of capital stock.
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
2
1972
0.20
Source: OECD, Saygılı, Cihan, and Yurtoğlu (2006)
11
Change in Growth Dynamics
Capital Productivity in Turkey and major EU
countries (1995 prices, USD)
Turkey
0.4
0.3
Spain
France
There is still room for
capital deepening.
Belgium
0.2
Italy
Germany
Denmark
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
0.1
Source: OECD, Saygılı, Cihan, and Yurtoğlu (2006)
12
What Needs to Be Done: Productivity
Convergence to EU
Capital Stock per capita (PPP, 1995
prices, in thousands, USD)
300
Finland 1993
Finland 2003
250
Spain 2003
200
Spain 1993
150
100
Turkey 2003
50
Two success stories:
•
Finland: Productivity gains
•
Spain: Capital deepening plus
productivity gains
Turkey 1993
0
0
5000
10000
15000
20000
25000
Income per capita (PPP, 1995 prices, USD)
Source: OECD, Saygılı, Cihan, and Yurtoğlu (2006)
13
What Needs to Be Done: Business Environment
Ease of Doing Business * (Turkey’s Ranking, 2007)
136
Employing workers
128
Dealing with licenses
112
Closing a business
68
Getting credit
Protecting investors
64
Ease of doing business
57
Trading across borders
56
Paying taxes
54
Starting a business
43
34
Enforcing contracts
31
Registering property
0
40
80
120
160
* Low scores are associated with better conditions for doing business
Source: World Bank, Doing Business 2008
14
What Needs to Be Done: Energy Prices
Electricity Prices for Industry
(US dollars per kilowatt-hour including taxes,, 2006)
Ireland
Portugal
Austria
Hungary
Turkey
Mexico
Slovakia
Czech Rep.
Spain
Switzerland
Poland
South Korea
USA
Taiwan
Norway
New Zealand
France
Kazakhistan
0.00
0.05
0.10
Source: Energy Information Administration
15
What Needs to Be Done: Governance
Governance Indicators of Turkey and EU-15 *
(2006)
2.0
EU-15
1.0
Turkey
0.0
-1.0
Control of Government Regulatory Voice and Rule of Law
Corruption Effectiveness Quality Accountability
Political
Stability
*Governance indicators are between –2.5 ile +2.5.
Higher forecast figures indicate better governance.
Source: World Bank
16
What Needs to Be Done: Social Security Reforms
The Ratio of Transfers from Budget to Social
Security Institutions to GDP (percent)
4.5
3.5
2.5
1.5
2007*
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
0.5
* Forecast for 2007
Source: Undersecretariat of the Treasury, Ministry of Finance
17
What Needs to Be Done: Employment Costs
Employment Taxes (as a percentage of labor cost, 2006)
Source: OECD
18
What Needs to Be Done: Tax Burden
Tax Effort Ratios in Turkey 1995-2004
Tax Effort Indicators
(a tax effort ratio above one indicates excessive
taxation)
(1995-2004)
Tax burden
rising
Tax burden
remains elevated
Tax burden
stays light
Tax burden
easing
Source: World Bank
19
What Needs to Be Done: Education
Employment by Economic Activity
(2002 Q3 – 2007 Q3, cumulative change, percent)
40
Mismatch Between Needs and Supply
(Distribution of University Graduates 2003)
Education
Agriculture
Computer
Sciences
France
9.3
0.3
3.0
Germany
7.7
2.1
3.9
United Kingdom
10.8
0.9
6.2
USA
13.1
1.0
3.9
Turkey
30.0
3.9
1.0
35.9
21.4
20
12.5
2.9
0
-20
Industry
Services
Construction
Agriculture
-40
Total
Employment
-24.3
Source: OECD; Saygılı, Cihan, and Yavan (2006)
Source: TURKSTAT
20
What Needs to Be Done?
Progress
Progress in
in any
any of
of these
these reform
reform areas
areas will
will add
add to
to the
the
growth
growth potential
potential of
of Turkey.
Turkey.
21
Macroeconomic Developments
and Future Prospects
Central Bank of
The Republic of Turkey
Erdem Başçı
Vice Governor
December 17, 2007
TUSIAD – CEPII Seminar
Paris
22