Certain items on Turkey’s “shopping list” can make sense only in combination with complementary factors.

Average GDP per capita growth was higher in Turkey in the first decade of the 2000 than in the 1990s. Turkey therefore has made certain progress in the convergence with advanced economies in terms of GDP per capita. Nonetheless, this marks a limited improvement as some developing countries achieved much higher growth rates and a stronger convergence. Besides, Turkey’s GDP per capita is still 30 percent of that of the US, also proving that the growth performance is not sufficient.

Radically low savings rate

It is evident that Turkey has to improve its growth performance. During the series about the economic performance of the BRICs, South Korea, and Turkey, I tried to put forth the growth constraints that I deem critical: first, Turkey’s savings rate is remarkably low. Second, the shares of high school and university graduates in population are small. The limited improvement in growth performance in the first decade of the millennium is obviously unsustainable. Studies suggest that weak performance in education is a principle cause of weak growth performance. Second was the small share of high-technology goods in exports.

There also are other reasons that hinder sustainable improvements in growth performance. I want to address these as much as the economic agenda allows. But first, I would like to cite a warning from a study I recently read. It takes departure from the following example: when he first became the president to France, Sarkozy establishes a commission to identify the constraints to higher growth and the ways to overcome these. The commission comes up with a total of 316 recommendations, each of which it argues to be indispensible. Number 209 is about hair dresser diplomas! Taking departure from this point, the study recommends that long lists of growth constraints that resemble a “shopping list” must be avoided.

Low female labor force participation

On the other hand, as important as they might be, certain recommendations that seem critical at the first glance might not have a meaning alone. Raising the labor force participation ratio is one example. It is well documented that Turkey has a quite low one. The problem is not about male participation but about female participation rate, however. Labor is a production input. And Turkey is unable to tap its potential due to low labor force participation among women. Within this context, it is purely natural that this appears as the chief growth constraints for Turkey and that measures to improve the labor force participation rate across women follow as a key recommendation.

Evidently, this potential can contribute to growth performance only if it finds reflection in the production process. Yet, participation into the labor force does not imply immediate participation into the production process. To be utterly frank, you first need to find them. For this, the newcomers should be skilled and there should be demand for new labor. Therefore, certain items on Turkey’s “shopping list” can make sense only in combination with complementary factors. Caution is needed on this. I will continue.

This commentary was published in Radikal daily on 26.01.2012