Table Of ContentOECD
URVEY!
OECD
ECONOMIC SURVEYS
TURKEY
ORGANISATION FORECONOMIC CO-OPERATION AND DEVELOPMENT
PursuanttoArticle 1 oftheConventionsignedinParison 14th
December1960,andwhichcameintoforceon30thSeptember1961,the
Organisation for Economic Co-operation and Development (OECD)
shallpromotepoliciesdesigned:
to achieve the highest sustainable economic growth and
employment and a rising standard of living in Member
countries,whilemaintainingfinancialstability,andthusto
contributetothedevelopmentoftheworldeconomy;
tocontribute to sound economic expansion in Memberas
well asnon-membercountries in theprocess ofeconomic
development;and
to contribute to the expansion of world trade on a
multilateral, non-discriminatory basis in accordance with
internationalobligations.
The original Member countries of the OECD are Austria,
Belgium,Canada,Denmark,France,Germany,Greece,Iceland,Ireland,
Italy,Luxembourg,theNetherlands,Norway,Portugal,Spain,Sweden,
Switzerland,Turkey,theUnitedKingdom andtheUnited States. The
followingcountriesbecameMemberssubsequentlythroughaccessionat
the dates indicated hereafter: Japan (28thApril 1964), Finland (28th
January 1969),Australia(7thJune1971)andNewZealand(29thMay
1973). TheCommissionoftheEuropeanCommunitiestakespartinthe
workofthe OECD(Article 13oftheOECD Convention).Yugoslavia
takespartinsomeoftheworkoftheOECD(agreementof28thOctober
1961).
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Contents
Introduction 9
I. Recent trends 10
Overview 10
Recovering output 12
End of the business investment slump? ]6
Increasing labour market slack 20
Persistent inflationary pressures 23
Accelerating labour costs 26
Worsening current external balance 28
II. Economic policies 47
Monetary policy 47
Fiscal policy 59
Energy policy 70
Other structural policies 71
Public sector deficits and inflation 73
III. Short-term projections 77
IV. The effects of structural adjustment policies on industrial development 79
The extent and nature of change in industry 80
The structure of protection 85
Productivity of factor inputs 91
The scope of industrial policies 93
The financial structure of Turkish manufacturing firms 96
Foreign direct investments and the ownership structure of Turkish
manufacturing 101
V. Conclusions 105
Notes and references 112
Annexes
I. Nominal and effective rates of protection 115
II. The determinants of corporate borrowing in Turkey: regression
results 117
III. Calendar of main economic events 120
Statistical and structural annex 131
Tables
Text
1. Split between output growth and inflation 10
2. Supply and use of resources 13
3. Production of manufacturing industries 15
4. Gross fixed investment by sector 17
5. Labour market 22
6. Prices 24
7. Wages 27
8. Foreign trade 30
9. Commodity composition of foreign trade 31
10. Geographic distribution of foreign trade 34
1 1. Constant market share analysis 36
12. Balance of payments 41
13. External debt of Turkey 44
14. Assets and liabilities of the Central Bank 50
15. Central Bank credits 53
16. Money and credit 54
17. Deposit interest rates 57
18. Lending rates 58
19. Public sector borrowing requirements 60
20. Central government budget 62
21. Central government budget revenues 64
22. Financial account of the State Economic Enterprises 72
23. Short-term projections 77
24. Index of structural change in industry 82
25. The structure of output relative to the structure of OECD demand
and imports 83
26. Expanding and declining manufacturing sectors in Turkey and
in the OECD area 84
27. The structure of protection 86
28. The structure of protection and domestic resource costs 88
29. The structure of protection and economies of scale 89
30. Total factor productivity 91
31. Sectoral distribution of investment certificates 95
32. Selected financial indicators for private manufacturing firms 97
33. International comparisons of financial indicators for private
manufacturing firms 99
34. Foreign direct investment 102
Annexes
Al. The degree of leverage of firms: regression results 118
Statistical and structural annex
A. National product 132
B. Supply and use of resources 133
C. Agricultural production 134
D. Industrial production 135
E. Prices 136
F. Imports by commodities 137
G. Exports by commodities 138
H. Geographic distribution of foreign trade 139
I. Balance of payments 140
J. Workers' remittances by month 141
K. Money and banking 142
L. Central government budget 143
M. Dollar exchange rate of the Turkish lira 144
Diagrams
Text
1. Macroeconomic performance 1 1
2. Real GNP and manufacturing production 12
3. The saving-investment balance 16
4. Capital-output ratio 18
5. Labour market developments 21
6. Trend of prices 25
7. Labour cost and productivity 28
8. Merchandise trade 29
9. Exchange rate developments 33
10. Trade balances by commodity group 38
1 1. Structure of the current external account 40
12. Foreign debt 42
13. Currency composition of Turkey's external debt 43
14. Central Bank money growth 49
15. M2 and counterparts 55
16. Reserve money multiplier 56
17. Domestic debt 69
18. Relationship between public sector deficits, growth and inflation 74
19. Structure of output and trade 81
20. Gross fixed investment by sector 93
BASICSTATISTICSOFTURKEY
THELAND
Area(thousandsq.km) 781 Majorcities,1990
Agriculturalarea(thousandsq.km) 280 (thousandinhabitants):
Forests(thousandsq.km) 202 Istanbul 7427
Ankara 3236
Izmir 2680
THEPEOPLE
Population,1990(thousands) 57163 Civilianlabourforce,1989(thousands) 18680
Persq.km,1990 73 Civilianemployment 16771
Annualaveragerateofchange Agriculture,forestry,fishing 8397
ofpopulation,1990 2.4 Industry 2558
Construction 874
Services 4909
PRODUCTION
GNP,1989(TLbillion) 170633 OriginofGDP,1989(percent):
Perhead(USJ) 1456 Agriculture,forestry,fishing 16.6
Grossfixedinvestment,1989(TLbillion) 38304 Industry 31.3
PercentofGNP 22.4 Construction 4.0
Perhead(USS) 32.7 Services 48.1
THEGOVERNMENT
Publicconsumption,1989(percentofGNP) 11.4 Publicdebt,end-1989(percentofGNP) 58.8
Centralgovernmentcurrentrevenue, Domestic 25.3
1989(percentofGNP) 17.8 Foreign 33.5
FOREIGNTRADE
Commodityexports,1989,fob Commodityimports,1989,cif
(percentofGNP) 14.4 (percentofGNP) 19.6
Mainexports(percentoftotalexports): Mainimports(percentoftotalimports):
Agriculture 18.3 Machineryandequipment 20.3
Mining 3.5 Transportequipment 5.0
Industry 78.2 Basemetals 14.5
Oil 15.6
WORKERS'REMITTANCES
(US$million)
1988 1865 1989 3138
THECURRENCY
Monetaryunil: Turkishlira CurrencyunitperUS$,
averageofdailyfigures:
1987 854.63
1988 1420.76
1989 2120.78
1990 2607.62
Note: Aninternationalcomparisonofcertainbasicstatisticsisgiveninanannextable.
ThisSurveyisbasedontheSecretariat'sstudyprepared
for the annual review of Turkey by the Economic and
DevelopmentReviewCommitteeon9thJanuary1991.
After revisions in the light of discussions during the
review, finalapprovaloftheSurveyforpublicationwasgiven
bytheCommitteeon5thFebruary1991.
The previous Survey of Turkey was issued in
January1990.
Introduction
In response to increasing public sector borrowing requirements and intensify¬
ing inflation pressures, the Turkish authorities began to apply the monetary and
fiscal brakes in 1988, though fromtime to time restraint waseased, mainlyto allow
contractual and agricultural incomes to catch up with inflation. As a result, growth
of real GNP was substantially reduced in 1988 (to 3.6 per cent) while at the same
time annual consumer price inflation soared to around 75 per cent. These problems
were aggravated in 1989, when exports stagnated because of sluggish Middle-
Eastern markets, and agricultural output suffered from a severe drought. The
resulting growth recession led, however, only to minor moderation of inflation in
1989 as food prices accelerated sharply because of domestic supply shortages.
Largely due to slowing imports in reaction to the weakness of domestic
demand, together with an upswing in revenues from tourism and higher receipts
from workers' remittances, the current balance swung into comfortable surplus in
1988 and remained there in 1989. But the fall in domestic demand growth did not
lead to greater efforts by industry to capture a larger share of export markets.
Flagging export performance coincided with an observed real effective appreciation
of the Turkish lira in foreign exchange markets as well as the reduction of direct
subsidies to exporters since 1988. Moreover, investment in manufacturing industry
has remained sluggish for a long period. This raises some doubt about whether the
trade reform of the 1980s has succeeded in sufficiently modifying the structure of
industrial output by shifting resources away from sheltered and inefficient sectors
towards industries exposed to international competition.
Macroeconomic developments are reviewed in Part I ofthis Economic Survey.
Part II presents an overview of the objectives of monetary and fiscal policies and
their realisation. The short- to medium-term outlook is sketched out in Part III.
Part IV aims at providing some indication on what lies behind the adjustment of
Turkish industry and at evaluating progress in implementing structural reforms.
Finally, conclusions for policy are presented in Part V.
