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    Our 'deep' problem and 2015

    Fatih Özatay, PhD22 March 2010 - Okunma Sayısı: 1048


    Good news was heard from the Standard and Poors who increased Turkey's credit grade. Turkey's performance is quite pleasing given that some EU member countries also in the Eurozone are faced with serious problems. The main reason for the increase of Turkey's credit grade is the fact that the financial sector does not encounter much problem. Particularly considering the 1980s, the progress Turkey made with respect to stability should not be underestimated. I believe it is quite obvious that if we had been caught by the global crisis with a weak banking sector, high public debt and high budget deficit, we would have gone through highly rough times.

    Everything is fine up to this point. However, I will now upset the applecart with three details. First: the data updated by the IMF at the end of January estimates that world economy contracted by 0.8 percent in 2009. The estimation for Eurozone countries and all EU countries is 3.9 percent and 4 percent, respectively. Emerging market economies and developing countries are estimated to have grown by 2.1 percent. It is estimated that Central and Eastern European countries Turkey along with them contracted by 4.3 percent. And the rate of contraction for Turkey's economy will be around 6 percent. There is no doubt that some economies contracted even more than Turkey. But the conclusion does not change; we performed worse. Unemployment rate, which was around 11 percent in 2008, is at 14.1 percent in average for the first eleven months of 2009!

    Turkey's credit grade is raised as the financial system was not harmed severely. But the comparison I made shows that the damage is not 'light' at all. But this was a comparison with the rest of the world. Let us think like this: if it was not for the stability program implemented right after the 2001 crisis and the attitude assumed roughly until the end of 2006, we would have taken a major. Therefore, we are harmed comparatively and 'relatively' less. But if we could have advanced on Turkey's deep problem; we would have been harmed less also in comparison with the rest of the world. So, what is Turkey's deep problem?

    The second point follows from my commentary published yesterday: Since 1950, Turkey achieved 4.8 percent growth in average. However it failed to close the income gap with developed countries. For instance, Turkey's per capita income as a ratio of USA's per capita income is 17 percent in 1960, 17.4 percent in 1990, and 17.8 percent in 2007. In short, occupied with being at hammer and tongs, we have gone round in circles in economic terms. This is Turkey's deep problem.

    Third, if we want to reduce the impact of the harm or be immune to any harm at all, we have to establish a new economic program that will overcome the fundamental structural issues lying at the core of our deep problem. This program should not only focus on stability but also advance on deep structural problems. Take the current state of affairs and think about the upcoming general elections (in 2010 or 2011). Remember that the general elections will be followed by the Presidential elections and then by the local elections. At the end of this election schedule, it will be 2015.

    So, the questions to ask are: First, do you believe that the fundamental economic structural problems lying at the core of out deep problem will be addressed until 2015? Second, will the economic milieu of 2015 be a milieu of structural reform or one where we will focus on how to reestablish the stability? What is this other than an eclipse of mind?


    This commentary was published in Radikal daily on 22.02.2010