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World Bank’s Global Economic Prospects Report Discussed at TEPAV The Global Economic Prospects 2011 report by the World Bank was discussed at TEPAV by World Bank officials and economists with a special focus on the prospects for Turkey.
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21/01/2011 - Viewed 2553 times

ANKARA - The Global Economic Prospects 2011: Navigating Strong Currents report recently published by the World Bank was discussed at a meeting held at TEPAV on Friday, January 21, 2011.

Speaking at the opening of the meeting, TEPAV Economic Studies Director Prof. Dr. Fatih Özatay said that Turkey had recovered from the global crisis neither rapidly nor slowly and stressed that the economy had achieved the production level before the crisis. The unemployment rate, however, remained high. Drawing attention to the risk facing Turkey in the short term due to the recession in the EU market, which is a major export market for Turkey, Özatay maintained that the fact that substantially high current account deficits were financed through short-term capital inflows posed an even greater risk for Turkey's economy.

Turkey cannot become a "star" unless the unemployment rate is reduced

Özatay emphasized that Turkey had not been able to break through the 4.5 percent potential growth rate, adding, "We seem to be content with the status quo." He went on to say that despite the praise claiming that Turkey's economy shines like a star, for this to happen the unemployment rate would have to be reduced and the level of welfare in developed countries attained.

Speaking next, World Bank Turkey Lead Operations Officer Florian Fichtl said that the recently issued report depicted the broad outlines of the current picture of the global economic trends.

Presenting the report, World Bank Development Prospects Group Manager Andrew Burns stated that the crisis was a sort of "stress test" that while being completed successfully by the majority of the developing countries had enabled significant progress in terms of production and employment. Burns stressed that the current period was full of uncertainties concerning financial flows and that the high food prices raised concerns.

Turkey at the midpoint

Maintaining that 7 percent growth was projected for developing countries in 2011, Burns stated that the level of economic activities also was of importance. Turkey held a position in the midpoint between developed countries and others and that a decrease in economic activities faced by the country was less significant.

Mark Thomas, Former Chief Economist of the World Bank, evaluated the findings of the report on Turkey's economy. Maintaining that Turkey had been a reformist country a few years earlier and was considered not to have been tested by investors following the reform process, it had a certain reputation for its successful reforms. Indicating that Turkey's economy had retreated, he mentioned the deterioration in fiscal discipline. In this context, he drew attention to the fund transfers the government had carried out to finance social security and health expenditures. He said that labor force participation by women and young people was a major reform area for Turkey.  He added that the rise in oil prices raised concerns for the escalation of imports.

Attention must be paid to the borrowing appetite of the private sector

Delivering a speech with the title "Turkey's Economy under the Great Recession," Prof. Dr. Erinç Yeldan of Bilkent University's Faculty of Economics stated that Turkey's economy currently was fueled by the rapidly increasing domestic demand. He said that he did not agree with the World Bank report, which implied that public finance had dressed its wounds and the economy was assured a quality recovery. He drew attention to the borrowing appetite of the private sector, which constituted a major risk for the economy. He added that the 2010s would be occupied with debates on how to manage this phenomenon and finance the current account deficit.  Yeldan went on to say that the Central Bank had taken the right steps in responding to the mentioned circumstances and that he did not find the public's assessment of it as "rowing against the current" correct.

To read the "Global Economic Prospects 2011" Report, please click here



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