European Union Macroeconomic Imbalance Procedure (MIP) and Turkey Assessment Evaluation Note / M. Coşkun Cangöz, Gülbin Şahinbeyoğlu, Taylan Kurt, Elif Yılmaz

Following the 2008 global financial crises, the European Union (EU) implemented a number of regulations in order to strengthen the coordination between fiscal and monetary policies, monitor macroeconomic policies, and improve the oversight of these policies. As a result, in 2011, with the establishment of the monitoring mechanism, the Macroeconomic Imbalance Procedure (MIP), which contains threshold values of various magnitudes, was developed and the sustainability of internal and external balances began to be monitored.

In the case of significant imbalances being detected by the MIP Scoreboard, the relevant country is expected to implement corrective measures within a certain period of time or else potentially face sanctions.

The MIP Scoreboard, which is an effective tool for monitoring macroeconomic imbalances, was created by TEPAV on the basis of publicly available official statistics for the candidate country Turkey. In addition, data on Turkey was evaluated in comparison with the 2019 MIP Scoreboard, which contains the most up-to-date published data for EU countries.

The "External Imbalance and Competitiveness Indicators" in the MIP Scoreboard created for Turkey point to the necessity to control external imbalances and reduce risk. Two of the six "Internal Imbalance Indicators" (unemployment rate and financial sector total liabilities) remain consistently above the threshold value. On the other hand, low public debt stands out as a balancing factor against risks from the private sector and the financial sector. The third category of the MIP Scoreboard, the “Employment Indicators,” revealed imbalances in the labor market, that the active workforce is continually decreasing, and the youth unemployment rate increased along with the long-term unemployment rate starting in 2013-2014.

Official statistics on the MIP are included in the 2017-2021 Official Statistical Program under the heading "Macroeconomic Monitoring Statistics." It is envisaged that the relevant statistics will be produced by TURKSTAT, and prior to the completion of these studies, TEPAV plans to update and publish the MIP Scoreboard in quarterly periods to ensure up-to-date monitoring of the related statistics as early indicators.

You may read evaluation note from here.

This evaluation note was published in Turkish on 11.01.2021