Turkish economy accelerating, but hitting some speed bumps

by Jessica Stone

Turkey is a founding member of the UN, and remains actively involved.  According to Turkey’s United Nations Security Council Candidate site,  “Turkey maintains Permanent Delegations at the UN Headquarters in New York, at the UN Offices in Geneva and Vienna, and at the United Nations Educational, Scientific and Cultural Organization (UNESCO) in Paris. ”  Turkey also makes substantial contributions to “UN funds, programs and agencies, as well as other relevant organizations.”

According to Turkish Business Outlook 2012, “Turkey is a manufacturing country, a major producer of a diverse range of industrial products.”   It also currently represents ” the 17th largest economy in the world and the 6th in Europe.”  It became a member of the IMF in 1947.   In May, the country paid off its $422.1 million debt to the IMF,  thus changing its IMF role from frequent borrower to lender.  This was a remarkable accomplishment since Turkey’s exports, the country’s primary economic strategy, still thrived in a unstable global economy.  By paying off the debts, Turkey “will become a net contributor to the IMF with a scheduled $5 billion investment that will see its role and influence in the fund increase.”

The Grand Bazaar in Istanbul, Turkey. Image Source: Bloomberg News, via Wall Street Journal
The Grand Bazaar in Istanbul, Turkey. Image Source: Bloomberg News, via Wall Street Journal

The IMF is impressed with how Turkey has challenged the global economic crisis.  Turkey-IMF relations have fortified and will only continue to become closer in the future. IMF senior representative Mark Lewis told SES Turkiye:

“Turkey’s role in the IMF is growing, and will continue to do so. With the ongoing reform of the IMF’s voting and capital, expected to be completed in the coming months, Turkey will be one of the 20 largest members of the IMF, and combined with the increase in capital across all countries, Turkey will see its capital in the IMF increase by about four times.”

Turkey has been a member of the World Trade Organization since 1995, and is a member of four coalitions within the organization. The groups in the WTO in which Turkey claims membership are the Asian Developing Members, G-33, Friends of A-D Negotiations, and “W52” Sponsors.

Compared to 20 years ago, Turkey has made significant progress in the global economy, and has become an emerging country.  Twenty years ago, Turkey would have been considered a typical ‘developing’ country.  But today, it boasts “historically low inflation, vigorous growth rates, falling debt levels, a thriving private sector, and increasingly stable democratic institutions” (Zakaria, 28).

However,  the Wall Street Journal reports Turkey’s thriving market is starting to slow down due to political uncertainty:

“The days when Turkey was considered a market darling are over and the government is in for a bumpy ride,” said Mert Yildiz, chief Turkey economist at Burgan Bank. “Turkey is either set for a pronounced crisis or years of slow growth that will feel like recession.”

This relates to what Sharma writes in the last paragraph in Broken BRICs.   Sharma says countries like Turkey may continue to rise but they will rise more slowly and inconsistently than what the IMF and economic experts are anticipating.  This theory is consistent with economic data about Turkey’s productivity, which shows it hasn’t fully reached the level of productivity of the world’s economic leaders.

The Organisation for Economic Co-Operation and Development’s labor statistics show countries’ GDP per hour of labor compared to the United States. Turkey’s labor productivity as measured by that statistic was only 46.3 percent of the United States’ productivity. By that measure, Turkey’s economic productivity narrowly beats out developing countries like Mexico and Chile, and has a way to go before it can beat the world’s productivity leaders such as Norway, Luxembourg, and Ireland.

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