Turkey’s ‘Economic Miracle’

Leaving aside political considerations (I would certainly fast-track Turkey’s EU accession process for many, many reasons), the economic attraction of Turkey as an EU member state is rapidly making itself felt. Just look at these numbers from Morgan Stanley’s Cerhan Sevic:

According to our estimates, Turkey?s overall productivity growth accelerated from an average of 2.1% a year in the 1990s (or an average of 3% in the 1960-2000 period) to an average of 8.8% in the last three years. The trend growth rate also increased from 2.3% in the 1990s (and 3.1% in the 1960-2000 period) to 5.8% in the post-crisis era. The productivity acceleration is even more pronounced in the business sector. The rate of non-farm labour productivity growth rose to an average of 9.5% per annum in the last three years, from 2.2% in the 1990s and 2.4% in the 1980-2000 period. The underlying trend growth rate improved from 2.4% in the 1990s to 6.3% in the last three years and 7.4% this year. Moreover, according to the State Institute of Statistics? estimates, the average annualised rate of increase in real output per person in the manufacturing sector during the 2001-2004 period has been 10.2%, compared with 3.8% in the 1990s. In other words, output per worker in the manufacturing sector has increased by a cumulative rate of 30.4%, as the trend growth rate jumped to 7.5% in the last three years.

Now with everything appearing to be so wonderfully lacklustre all over the eurozone, you might have thought an economy with an underlying trend growth rate of 6.3% and rising would be worth taking very seriously indeed.

The other interesting point would be to ask why it is that Turkey is apparently so succesful, even in comparison to the other new EU accession states (and without all the aid). I would suspect that demography has something to do with it, but then I imagine most of you could already have guessed I was going to say that :).

This entry was posted in A Fistful Of Euros, Transition and accession by Edward Hugh. Bookmark the permalink.

About Edward Hugh

Edward 'the bonobo is a Catalan economist of British extraction. After being born, brought-up and educated in the United Kingdom, Edward subsequently settled in Barcelona where he has now lived for over 15 years. As a consequence Edward considers himself to be "Catalan by adoption". He has also to some extent been "adopted by Catalonia", since throughout the current economic crisis he has been a constant voice on TV, radio and in the press arguing in favor of the need for some kind of internal devaluation if Spain wants to stay inside the Euro. By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".

5 thoughts on “Turkey’s ‘Economic Miracle’

  1. I would support Turkey’s entrance into the EU on political grounds. It’s also true that economically it’s doing much better than it was, as Morgan Stanley say, and thahks for the pointer.

    Looking at the last 3 years is a little bit disingenious, in 2001 the economy contracted by 7.5%. Some of the growth since then has been catch-up stuff.

    Indeed Turkey is still much poorer than most EU accession states, GDP per capita is about $4500, so growth should be faster. Nevertheless you and they are surely right to say it has turned a corner since 2002.

    Also it would boost the EU’s growth rate, but not by much. Turkey’s GDP is somewhere in the region of about $340bn, which is about 3%-4% of EU gdp. Thus even 6% a year outperformance would only boost EU growth by about 0.2%.

  2. I’m not sure how successful this is, really. As Matthew points out, Turkey is starting off from a much lower level than the 2004 crops of applicants. Most of the 2004 applicants are structurally quite similar to the existing European Union states, in terms of levels of social development and the distribution of population per economic sector; compared to the existing European Union states in the 1970s, for instance, they’re quite similar. Their problem is mainly legacies of under- and mis-investment. Turkey’s still coming from a lower level, and Eurostat figures from the 1990s suggest that the trend in that decade was towards weak divergence.

    High growth rates in the aftermath of prolonged relative decline and starting from low levels are to be hoped for. This changes, of course, if/when Turkey manages to sustain these high growth rates.

  3. My impression is that Turkey has had severe macroeconomic ups and downs, with sometimes ludicrous inflation rates. I don’t think we can characterize Turkey’s growth rate as that good, considering that the country’s population is also increasing.

    It sounds to me like you have many reasons to want Turkey in the EU besides economics and pick economic arguments to convince people of that. What are your arguments for putting Turkey in the EU?

    How do you rate human rights, the role of the military, cultural rights for ethnic minorities, occupation of Cyprus, military adventurism in Iraq, etc?

    It seems to me that economics is not what is going to decide if Turkey gets into the EU or not.

  4. Mathew, Randy, Hector: points taken. Frans G has also raised similar points in the trackback, rather than some bitty comments I’ll try and post something more worthwhile on this tomorrow.

    Meantime: nice to see I’m still controversial :).

  5. “This changes, of course, if/when Turkey manages to sustain these high growth rates.”

    This is what I’m hoping for Randy, this is what I’m hoping for. And not only because it would prove me right :).

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