If one were to ask the question: “What are Turkey’s main economic problems and their solutions?” A variety of answers may be given in accordance to different perspectives or different ideologies. However, we can assume that there will be a consensus on possible problems and possible solutions.
Growth rates should be reasonable and realistic. Export and tourism revenues should be increased. A favorable environment should be created for more direct foreign investments. Foreign trade and current account deficit should be reduced. Products imported in large diameters should be produced domestically. Economic and political stability should be given importance in the country. The image of our country abroad should be improved.
At what stage are the solutions? Let’s refer to them very briefly.
The government announced that the high growth rate achieved in 2017 will continue this year. The high rate of growth is useful for reviving the economy and expanding the employment volume. However, instead of the real sector, the fact that the growth is based on the increase in domestic demand may lead to an increase in imports, an increase in inflation, a rise in interest rates and a further increase in current account deficit. In such an environment it is natural that interest rates should also move upwards. It is clear that the upcoming elections play a role in determining the pace of economic growth.
It is true that exports are recovering in 2017. But it is not enough. The proportion of products containing advanced technology in the exports is still 3-4%. Part of the increase in value is the result of the development in favor of the euro in the euro-dollar parity. Turkey produces cheap goods. Our competitive power is not enough. It is known that some studies have been done in this regard. Providing incentives on a project basis is the best policy option. Exportation is known to be the healthiest currency source.
Turkey has taken much from the tourism sector, the industry made significant investments in recent years and has achieved annual revenues of over 40 billion dollars. This number has now fallen to around 30 billion dollars. The reason is security and geopolitical concerns. The negative perception of our country abroad must be resolved.
Turkey, a country with high external debt and current account deficit. The need for external source is continuous. This year it will pay about 185 billion dollars for foreign debt and will work on the financing of a 50-55 billion dollar current deficit. It is important in this respect to determine the growth rate at a reasonable level. Moreover, finding outsourcing is not as abundant and cheap as it used to be. Monetary expansion policies in the financial markets will end. The cost of the source will be higher.
What is important in the resource inflows that support the growth rate is not the hot money that is temporary and speculative but the foreign direct investments. There is an interesting process in this regard. While foreign direct investments are gradually decreasing, hot money exits are experienced. Foreigners have complaints about security, stability and legal order.
Ensuring and sustaining economic and political stability within the country is of utmost importance not only for foreign investors but also for our domestic investors. Tension politics also cause turbulence in the curriculum, creating difficulties in determining price and cost.
Approximately two-thirds of our country’s imports are made up of raw materials and intermediate goods. Producing what is possible from these items in the country will reduce both the importation and foreign trade position and the current deficit. According to the authorities, 7 sectors and 43 products were identified in these studies, which are called localization movements. Special incentives will be given for the domestic production of these products. An import savings of $ 102-106 billion will be provided, and the current account deficit of $ 19.5 billion will be closed in this way in the first stage. This work is important. However, it should not be turned into an import substitution policy which is tried to be implemented in the 70s. At that time, all kinds of protection measures were applied to support domestic production, and imports were expensive with inward incentives and subsidies, resulting in the market filling with poor quality products with no competitive power. Subsidies have also been required for the exportation of these products. It is a fact that the products that are decided to be produced domestically have stable supply, competitive price and quality. There must be products with high added value. It is evident that many years are needed to get results from these measures. Nevertheless, it is important to place them in the first stages of our economic agenda. However, rather than making decisions and organizations, the most significant thing in this issue is taking action.
ŞEVKET ÖZÜGERGİN (Economist)