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    Need for a new economic program (2)

    Fatih Özatay, PhD24 November 2011 - Okunma Sayısı: 968

    Turkey’s production is highly dependent on the import of intermediate goods and investments are highly dependent on the import of investment goods. Adding the fact that it is a net energy importer, the picture is not surprising.

    I want to address the “need for a new economic program” in the context of the “high growth – (constantly high) unemployment rate” phenomenon as much as I have time. I could have said “a new economic model” or “structural reforms” instead of a “new economic program.” But I did not, because the exact meaning of the first one is not clear to me and the second one has become or is about to become a hollow phrase as it has been used on all occasions. My commentaries on this issue do not aim to put forth new phenomena. Some part of the things I am planning to write about had been raised before by me or by other commentators. Though, I might occasionally try to raise untouched phenomenon. Anyway, my objective is to draw attention to certain phenomena addressed before. Today’s subject is a phenomenon named “import oriented growth.”

    What needs to be changed?
    Figure 1 shows the movements in gross domestic product (GDP) and imports. I have not assessed the relationship between these two variables for a long time. I knew well in advance that they moved together; but I have to confess that I did not remember that the movement of the two was that “bonded” and harmonious or it had not been the case before. Both series depicted in the figure are seasonally adjusted. The figure gives quarterly data from the first quarter of 1998 to the second quarter of 2011 for GDP and to the third quarter of 2011 for imports.

    We all know what underlies this harmonious movement: Turkey’s production is highly dependent on the import of intermediate goods. Similarly, investments are highly dependent on the import of investment goods. Adding the fact that the country is a net energy importer, the picture is not surprising. Figure 2 gives the movements in machinery and equipment investments in the GDP and importation of investment goods. It is seen that the two variables have a quite similar course.

    Beware! I am not arguing that “Turkey grew via imports.” Such an argument would be nothing but nonsense. What I am trying to highlight is that in periods of rapid growth, Turkey’s imports also grow rapidly. In the case that we lack the foreign exchange to finance imports, we have to borrow foreign exchange. If the external conditions are not favorable, we fail to access foreign exchange loans and have to lower import requirement, and thus the growth rate. This is one of the key structural challenges that need to be overcome via a new economic program.

    2411 1

    Figure 1. Imports and GDP: 1998 first quarter – 2011 third quarter (imports on the left axis, US$ million, right axis GDP-with 1998 prices, million TL).

    2411 2

    Figure 2. Import of investment good and machinery investment item under GDP: 1998 first quarter – 2011 third quarter (imports on the left axis, US$ million, right axis GDP-with 1998 prices, million TL).

     

    This commentary was published in Radikal daily on 24.11.2011

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