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Turkish Reforms And Their Social Implications April 201 3. Emre Deliveli. Summary of Turkish Reforms And their social implications. Outline. Brief history of reforms in Turkey. 1920s: Reforms aimed at westernization ( S ecularism , civil law etc.) 1940s: Transition to democracy - PowerPoint PPT Presentation

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Slide 1

Emre Deliveli

Turkish ReformsAndTheir Social Implications

April 2013OutlineSummary of Turkish Reforms

And their social implicationsBrief history of reforms in Turkey1920s: Reforms aimed at westernization (Secularism, civil law etc.)1940s: Transition to democracy (Multi-party politics) 1950s: NATO membership (Western security alliance framework)1980s: First generation economic reforms (Price reforms, free trade)2000s: EU reforms + completion of first generation reforms (Improvement in democratic standards) (Fiscal discipline, macroeconomic stability)How Mediterranean is Turkish Economy?Slide 3New political elite, new energySecond generation reforms (institutions & skills)?Key dynamic: rapid urbanization (= main source of economic growth)Urban population as a percentage of the total population in Turkey and EU countries, (%), 1960-2010Source: World Bank, World Development IndicatorsHow Mediterranean is Turkish Economy?Slide 4Relations with Neighbours-South Caucasus4Summary of Turkish ReformsThe Ozal Years

The 1980 reforms to downgrade the import-substitution based development strategy in order toupgrade an export-led growth helped to catch a high growth platform for a couple of years but such ahigh level of re-structuring had its own drawbacks and financial liberalization policies created abanking crisis in 1983.

However, the recovery was fast and Turkey experienced strong growth for another decade.

Financial liberalization also brought new diseases to potential growth, such as dollarization.

International financial institutions, such as the International Monetary Fund (IMF), were familiar visitors in those years but this did not prevent another heavy banking crisis in 1994.

The 1990s are generally been accepted as lost years not only because of the 1998 earthquake but also because of the global financial spillover, such as the Russian and the Far-East crises. The decade ended with a deep economic crisis in 2001

Summary of Turkish ReformsDervis and Justice and Development Party (AKP)

Expansionary fiscal contraction

Inflation Targeting

Banking Reform

Expansionary fiscal contraction IFiscal discipline since the 2001 crisis has led to a decline in budget deficit to 1%, while the primary balance generated over 5% surplus. Having risen to 5.5% in 2009 due to the crisis, the budget deficit has improved since then, falling to some 1.4% of GDP in 2011.

Expansionary fiscal contraction IIDebt to GDP ratio of above 70% post 2001 crisis has fallen to below 40%. This has led Treasury rates to permanently decline to single digits.

The Sharp fall interest ratesAs a result, nominal and real rates fell sharply.

Inflation: The Long ViewInflation has declined to high single-digit levels from over 70% in 2002, yet hasnt been able to break the 7-11% band on the downside since 2004, except during the crisis.

Results: GrowthEnd of the sharp swings?8.6

Turkeys top-5 export items (1980, share %)How Mediterranean is Turkish Economy?Source: UN COMTRADETurkeys top-5 export items (2010, share %)Slide 12Economic transformation: a lot of diversification and a little bit of sophisticationRapid trade integration after 2001 crisisHow Mediterranean is Turkish Economy?Slide 13Turkeys imports to and exports from the World 1990-2011, USD bnSource: UN COMTRADE, TEPAV CalculationsUnemployment: The Long ViewThe key to understanding Turkish labor force is not people who cannot find work, but those who dont want to work.

InequalitySimple Gini Coefficient hides some of what is going on.

Poverty

What is missing? Turkeys connectivity problem (+ prioritization problem: carrying passengers vs. carrying containers)Regional PictureHow Mediterranean is Turkish Economy?

stanbul - 105Tekirda+ 6Denizli0Antalya+ 2Kayseri+ 10Gaziantep+ 15Ankara+ 18Bolu+ 2Bursa + 28Samsun+ 8Adana+ 7Balkesir+ 2zmir- 37Eskiehir+ 1Hatay+ 8K.Mara+ 11Kocaeli+ 40Konya+ 12Manisa+ 7Mersin- 3Ordu+ 1Sakarya+ 4Trabzon+ 3Karaman- 1Six-lane Expressways (red lines, as of 2010) and the change in the number of firms located in the provinces that had more than 5 firms in the largest 1000 industrial enterprise rating of the Istanbul Chamber of Industry by 2009, between 1997 and 2009.Kaynak: stanbul Sanayi OdasSlide 17Sosyal gelimilik Relations with Neighbours-South Caucasus17What is Missing? Education policy is economic policy for TurkeySlide 18Average age of the populationFemale labor force participation rate (%)Average years of education 1USA36.95812.42China35.5677.53Japan44.84811.54Germany44.95312.25France39.95110.46UK40.0559.57Brazil29.3607.28Italy43.5389.79India26.2334.410Canada41.06311.511Russia38.7588.812Spain40.54910.413Mexico27.1438.714S. Korea38.45011.615Australia37.7589.816Netherlands41.16011.217Turkey28.5246.518Indonesia28.2525.719Switzerland41.76110.320Poland38.54610.0How Mediterranean is Turkish Economy?Emre Deliveliemre.deliveli@gmail.com+90 533-6365340www.economonitor.com/emredeliveliHurriyet Daily News columns

Thanks for listening!Questions & Discussion