The World Economy after the Crisis: Risks and Possible Solutions During a meeting held at TEPAV, recent developments in the world economy and their impacts on Turkey were discussed in their many aspects.
ANKARA – On Friday, 30 March 2012, a meeting was held at TEPAV to discuss the challenges and risks the world economy has faced in the post-crisis era particularly after August 2011 and their impacts on the Turkish economy. The speakers drew attention to Turkey’s current export composition, savings rate, and the risks related to the current account deficit and recommended a policy mix to focus on informality, innovation, women’s employment and productivity gains.
TEPAV Director Prof. Güven Sak delivered the opening speech of the meeting titled “Developments and Trends in the World Economy.” Sak shared with the audience the GDP and export figures of Turkey since the emergence of the crisis and stated that Turkey had completed the output recovery whereas for exports the recovery process had just begun.
“No scheduled container transportation from Turkey to Europe!”
Pointing at the European Union (EU) market in this respect, he maintained that should the European crisis extend, the fall in the EU’s demand would decrease the share of sophisticated goods in Turkey’s export markets, and that measures had to be taken to avoid such an outcome. He said, “I have recently learned that there is no scheduled container transportation between Turkey and Europe. We are currently carrying out studies in this field.”
The keynote speaker of the meeting, economist Yusuf Işık, delivered a speech on the developments the world economy has undergone since the global financial crisis of 2008. Stressing that the three years ahead would be of critical importance and that coordination was a major issue, he said, “A country can record a current account deficit. But if giving a current account deficit is the only way for growth, then this becomes an impediment.”
Emphasis on innovation
Underscoring the need for innovations, he added, “At this point, we have to ask ourselves whether Turkey has attained a position in the global value chain constructed around the information economy. I am not just talking about Turkey’s production structure being dependent on imports. Beyond this, we need to go through a serious process of thinking.” He also stressed that Turkey’s growth perspective did not generate job opportunities.
Following the keynote speech, discussants Professor Fatih Özatay, TEPAV Finance Institute Director, and Esen Çağlar, TEPAV Economic Policy Analyst, raised some issues.
Özatay stated that the recent developments in Spain caused pessimistic estimates on the growth of Turkey, and that the insufficiency of savings aggravated the hopes for external help.
Are the successful sectors really successful?
He added, “We are presenting medium-tech exports as successful economic performance. Also, in the construction sector, which we consider to be a rising sector, design activities are carried out abroad while the low value-added segments of the process are done by Turkish firms.” In response to a question on the steps Turkey has to take, he said, “There are a number of problems and it is impossible to solve them all. I think that if we start with an anti-informality agenda, we can raise savings to finance other reforms. This way, we can improve productivity and lower the current account deficit to some extent.”
He recommended a two-pillar reform package that also improves measures to advance the skills level of the labor force. Citing political observer Machiavelli, he concluded how the status quo and political concerns hindered reforms.
TEPAV Analyst Esen Çağlar asked the question What Turkey could have done differently. He suggested different scenarios in the light of a comparative assessment on Turkey and South Korea as a success story.
Turkey could be the sixth largest economy if women’s employment and productivity were improved
He stressed that if the female labor force participation ratio increased from the current 24 percent to Korea’s 50 percent, Turkey’s GDP would increase from $734 billion to $1.1 trillion and per capita GDP from $10,000 to $13,000.
If the level of output per worker increased from the current $30,000 to South Korea’s $41,000, the GDP would reach $1.3 trillion and per capita GDP $18,000. He stressed that under these scenarios, Turkey, currently the seventeenth biggest economy of the world, could become the thirteenth under the first and eleventh under the second scenario. He also emphasized the lack of political will to promote women’s participation in the labor force.
The meeting ended after questions and comments from the audience.
