OECD issues economic survey of Turkey

The Organization for Economic Cooperation and Development (OECD) published today, July 12, a report regarding the Turkish economy. The organization highlighted that effective macroeconomic and structural policies helped the Turkish economy rebound vigorously following the global crisis in 2008, while Turkey's economic growth averaged close to nine percent in 2010-11 accompanied by strong job creation. 
 
In its report, the OECD said that domestic demand in the country recovered swiftly after the global crisis, with growth reaching 9.2 percent in 2010 and 8.5 percent in 2011. In the process, however, the current account deficit widened to around 10 percent of GDP and consumer price inflation rose to over 10 percent.
 
According to the OECD, the economic slowdown since mid-2011 is helping to reduce these external and domestic imbalances, albeit only gradually, given rising international energy prices. In the process of the post-crisis recovery, Turkish imports soared as a result of both strong domestic demand and loss of competitiveness which led to a rise in import penetration in consumer, intermediate and capital goods markets. At the same time, exports increased only moderately as a result of weakness in foreign markets, due to the debt crisis in the euro area and political turmoil in the MENA region, but also due to losses in Turkish exporters' market shares up to mid-2011. The OECD noted that recently import penetration rates declined while Turkey started to recoup market shares abroad.
 
A major structural initiative in Turkey is the introduction of a new investment incentive system, extending the existing one and making it more generous, said the OECD. The incentives are expected to augment supply capacity in the tradable section, which may help increase exports or reduce imports in the coming years.
 
The OECD's short-term outlook for Turkish economic activity appears relatively favorable. The organization said that domestic confidence has been improving in recent months for both businesses and consumers. In the absence of renewed turbulence in international financial markets, the economy is set to grow by more than three percent in 2012, picking up to above 4.5 percent in 2013. Inlation is projected by the OECD to fall but to remain uncomfortably high for some time, while the current account correction is projected to continue, albeit only very gradually.