06.11.2007 - Source: European Commission

Macroeconomic stability ("Turkey 2007 Progress Report [SEC(2007) 1436]") [ID 22480]

"Real GDP grew in 2006 by 6.1%, down from 7.4% in 2005. In the first half of 2007, growth decelerated to 5.3%. Domestic consumption slowed down since the second half of 2006 as a result of the monetary policy tightening, which followed the financial turbulences of May- June 2006. The slowdown in domestic demand appears to be partly alleviated by strengthening external demand. Government consumption and investment have been broadly kept under control by tight fiscal policies. Economic growth slowed down slightly, but remained strong.

Strong domestic demand fuelled by rapid credit growth and higher oil import prices led to a widening of external deficits. The current account deficit increased from 6¨÷% of GDP in 2005 to 8% of GDP in 2006. In the first half of 2007 however, strong exports contributed to a slight reduction of the deficit to approximately 7.8% of GDP in the first seven months of 2007. Turkey can still comfortably finance its current account deficit and has recently considerably increased its foreign currency reserves as a consequence of high privatisation revenues and rising interest from foreign investors. Moreover the current account deficit was also driven by higher investment, which should over the medium term further enhance the export capacity of the economy. External deficits were sizeable, but the financing became more sustainable.

Even though economic growth has been strong, few new jobs have been created, as employment grew by only 1.3% in 2006. The employment rate hovered around 44-45% in EN 27 EN 2006-2007. In particular, the female employment rate remained low at 22-23%. The unemployment rate has remained between 8% and 10%. The skill-mismatch between labour demand and supply, and in particular the cost of hiring and firing continue to hamper job creation. Unemployment was much higher among the young (around 19%) and of a long-term nature for more than half of job-seekers. The lower unemployment rate in the agricultural sector, where unpaid family workers are incorporated, suggests the existence of large pockets of underemployment in the economy.

At the end-2006, inflation had increased to about 10% (from 8% early 2006) driven by various issues, including the exchange rate pass-through, rigidities in services prices and high energy prices. This rate was significantly higher than the central bank's year-end target of 5%. Inflation started to come down again in the second quarter of 2007, to 7.1% in the year to September 2007. Unprocessed food, oil prices, exchange rate volatility and fiscal policy loosening are major risks for the inflation trend. In sum, the downwards trend in inflation decelerated."

Document(s): Open document

10.2005 - Source: UK Home Office

UK Home Office: Turkish economy October 2005 ("Country Report - October 2005") [#40563], [ID 13202]

"3.01 As noted in the US State Department report 2004 (USSD), published 28 February 2005:

“The country had a market economy and a population of approximately 67.8 million. Industry and services dominated the economy, but agriculture remained important. During the year [2004], the real gross domestic product was expected to grow by over 10 percent and consumer prices were expected to rise by less than 12 percent…There were major disparities in income, particularly between the relatively developed west and the less developed east.” [5c] (Introduction)

3.02 The British Embassy in Ankara reported on 18 April 2005 that:

“Turkey was the world’s 18th largest economy in 2003 and had the fastest growth rate (9.9% GNP) among OECD countries in 2004. Textiles, automotive and electronic appliances are the fastest growing sectors, with many of the goods exported to Europe. An IMF backed stability programme has helped bring down annual inflation to single digits (CPI was 8.9% in March 2005), and prudent fiscal policies have brought about reductions in the budget deficit and national debt stock as measured against GNP. High unemployment and large income disparities are the biggest economic challenges facing Turkey. The official unemployment rate was 10.3% in 2004, but youth unemployment is much higher and there is a significant degree of hidden unemployment. Real wages have not recovered from the recession in 2001 and the large gap in income inequalities between the more prosperous west and the disadvantaged east remains.” [4c]

3.03 On 31 December 2004, BBC News reported that Turkey was to re-launch its currency, knocking six zeros off the lira in the hope of boosting trade and powering its growing economy. “The currency – officially to be known as the new lira [New] Turkish Lira [YTL] – will be launched at midnight on 1 January. From that point, the one-million lira note will become the new one-lira coin.” [66ab]

3.04 As reported by BBC Market Data on 4 September 2005, the exchange rate was then 2.46 [New] Turkish Lira (YTL) to £1 sterling. [66f]

3.05 The World Bank Data and Statistics for Turkey – World Development Indicators database, April 2005 (website accessed 4 September 2005) recorded a GNI per capita [average annual income] in 2003 of US$ 2,800 [corresponding to £1,520 in September 2005]. The GNI for 2002 was US$ 2,510. [45]

3.06 The European Commission Turkey 2005 Progress Report, released on 9 November 2005 noted that:

“As regards employment policy, the labour market continues to display poor performance and little progress can be reported. Low labour force participation and employment rates, in particular of women, high levels of youth unemployment, the large size of the informal economy and the strong rural/urban labour market divide remain the main challenges. The overall employment rate in 2004 stood at 43.7% with a slight increase compared to 2003. However, female employment is still low at just under 25%, while male employment picked up slightly from 62.9% in 2003 to 64.7% in 2004.” [71e] (p95)"

Document(s): Open document

02.06.2005 - Source:

Economy overview ("World Factbook 2005: Turkey - Economy") [ID 13203]

"Turkey's dynamic economy is a complex mix of modern industry and commerce along with a traditional agriculture sector that in 2004 still accounted for more than 35% of employment. It has a strong and rapidly growing private sector, yet the state still plays a major role in basic industry, banking, transport, and communication. The largest industrial sector is textiles and clothing, which accounts for one-third of industrial employment; it faces stiff competition in international markets with the end of the global quota system. However, other sectors, notably the automotive and electronics industries, are rising in importance within Turkey's export mix. In recent years the economic situation has been marked by erratic economic growth and serious imbalances. Real GNP growth has exceeded 6% in many years, but this strong expansion has been interrupted by sharp declines in output in 1994, 1999, and 2001. Inflation, in recent years in the high double-digit range, fell to 9.3% by 2004 - a 30-year low. Despite these strong economic gains in 2002-04, which were largely due to renewed investor interest in emerging markets, IMF backing, and tighter fiscal policy, the economy is still plagued with high debt and deficits. The public sector fiscal deficit exceeds 6% of GDP - due in large part to the huge burden of interest payments, which accounted for more than 40% of central government spending in 2004, and to populist spending. Foreign direct investment (FDI) in Turkey remains low - averaging less than $1 billion annually, but further economic and judicial reforms and prospective EU membership are expected to boost FDI. A major political and economic issue over the next decade is whether or not Turkey will become a member of the EU."

Document(s): World Factbook 2005: Turkey - Economy

04.2005 - Source: UK Home Office

Economy ("Country Report - April 2005") [#31987], [ID 13205]

"[...]3.1 As noted in the US State Department report 2004 (USSD), published 28 February 2005: “The country had a market economy and a population of approximately 67.8 million. Industry and services dominated the economy, but agriculture remained important. During the year [2004], the real gross domestic product was expected to grow by over 10 percent and consumer prices were expected to rise by less than 12 percent…There were major disparities in income, particularly between the relatively developed west and the less developed east.” [5c] (Introduction)
3.2 The British Embassy in Ankara reported on 18 April 2005 that: “Turkey was the world's 18th largest economy in 2003 and had the fastest growth rate (9.9% GNP) among OECD countries in 2004. Textiles, automotive and electronic appliances are the fastest growing sectors, with many of the goods exported to Europe. An IMF backed stability programme has helped bring down annual inflation to single digits (CPI was 8.9% in March 2005), and prudent fiscal policies have brought about reductions in the budget deficit and national debt stock as measured against GNP. High unemployment and large income disparities are the biggest economic challenges facing Turkey. The official unemployment rate was 10.3% in 2004, but youth unemployment is much higher and there is a significant degree of hidden unemployment. Real wages have not recovered from the recession in 2001 and the large gap in income inequalities between the more prosperous west and the disadvantaged east remains.” [4c]
3.3 On 31 December 2004, BBC News reported that Turkey was to re-launch its currency, knocking six zeros off the lira in the hope of boosting trade and powering its growing economy. “The currency - officially to be known as the new lira - will be launched at midnight on 1 January. From that point, the one-million lira note will become the new one-lira coin. “ [66ab]
3.4 As reported by BBC Market Data on 26 January 2005, the exchange rate was then 2.49 Turkish Lira (TL) to £1 sterling. [66f]
3.5 The World Bank Data and Statistics for Turkey - World Development Indicators database, August 2004 (website accessed 16 April 2005) recorded a GNI per capita [average annual income] in 2003 of US$ 2,790 [corresponding to £1,474 in April 2005]. The GNI for 2002 was US$ 2,510. [45] [...]"

Document(s): Open document

25.02.2004 - Source: US Department of State

Unemployment remains above 10 percent ("Country Reports on Human Rights Practices - 2003") [#19741], [ID 13206]

"The country had a market economy and a population of approximately 67.8 million. Industry and services dominated the economy, but agriculture remained important. During the year, the economy grew by an estimated 5 percent and inflation fell to around 20 percent. Unemployment remained above 10 percent and there was significant underemployment. Wages and benefits did not keep pace with inflation, particularly in the public sector. There were major disparities in income, particularly between the relatively developed west and the less developed east."

Document(s): Open document

06.11.2003 - Source: Schweizerische Flüchtlingshilfe

Socio-economic situation ("Asylsuchende aus der Türkei - Position der SFH") [#17802], [ID 13207]

"4.3 Die sozioökonomische Situation

Die allgemeine Wirtschaftslage muss trotz der jüngsten Strukturreformen und Deregulierungsmassnahmen als katastrophal betrachtet werden. Die türkische Wirtschaft stagniert seit dem Kollaps im Februar 2001. Neben anderen Faktoren hat sich der Irakkrieg negativ auf die Mikrowirtschaft ausgewirkt. Die wirtschaftlich schlechte Lage hat mittlerweile ein Ausmass erreicht, dass nicht einmal mehr Familienangehörige mit kleinen und mittelgrossen Betrieben für eine soziale und wirtschaftliche Integration von Rückkehrenden Garantie sein können, weil diese ums Überleben kämpfen. Für Personen, insbesondere für Familien, ist eine Neuansiedlung in den westtürkischen Grosstädten geradezu unmöglich. Die Mieten sind horrend und die Arbeitssuche aussichtslos. Die Rückkehr in Dörfer mit Hilfe staatlicher Rückkehrprogramme wird unter anderem von Problemen mit den Dorfwächtern überschattet. Trotz zahlreicher Bemühungen konnte die Ungleichheit zwischen Frau und Mann in der türkischen Gesellschaft noch nicht überwunden werden. Frauen sind in zahlreichen Alltagssituation extrem benachteiligt. Der Zugang Kranker zu möglichen medizinischen Leistungen stellt ein Problem dar. Nicht alle Krankheiten sind in der Türkei überall behandelbar und das türkische Gesundheitssystem kämpft mit zahlreichen Schwierigkeiten."

Document(s): Open document

10.2002 - Source: UK Home Office

UK Home Office: Turkish economy ("Country Assessment - October 2002") [#9887], [ID 13208]

"3.1 Turkey has suffered from unstable economic conditions for much of the last twenty years. Since the early 1980s the previously centrally planned economy has been gradually liberalised. There have been periods of rapid growth interspersed with sudden, mostly short-lived crises, against a background of high inflation (usually in the range of 50-100% annually). Inflation has damaged the public's trust in the local currency, causing interest rates to rise. As a result of high interest rates, as well as the increasing borrowing requirement of the public sector, the public sector debt stock has risen sharply in recent years. In order to roll-over the debt stock, the government has had to borrow at very high interest rates. This vicious circle has also contributed to distortions in income distribution, helped create a banking sector based largely on trading in government securities, and deterred foreign investment. Some parts of the private sector have been dynamic (the active "unregistered" economy has also contributed to growth). However, structural problems have held back Turkey's development.
3.2 In the light of these economic problems the current government began a three year US$4 billion Standby Agreement programme with IMF financing in January 2000. The primary objective was to reduce inflation to single-digit levels. The main tool of the programme was a "crawling peg" exchange rate policy, under which the rate of devaluation of the Turkish lira (TL) against a foreign currency basket was pre-announced. The initial results of the programme included a sudden fall in interest rates, which led to a sharp increase in domestic demand and a huge rise in imports, stemming from the appreciation of the TL in real terms under the exchange rate policy. Considerable progress was made in reducing inflation, which fell from 63% to 33% during 2000. But delays in the implementation of structural reforms, endemic problems in the banking sector, and the widening foreign trade deficit all contributed to a financial crisis at the end of November 2000. The IMF moved quickly to bale Turkey out with a US $7500 million Supplementary Reserve Facility in December 2000. Despite relative stability in the markets in January 2001, the TL came under pressure again in February. A further crisis was triggered by a political disagreement between President Sezer and Prime Minister Ecevit on 19 February 2001. This led to the TL being allowed to float on 22 February, and to the end of the Standby Agreement in its original form.
3.3 In order to restore confidence in the financial markets, the Government appointed Kemal Derviє, a Turkish Vice President of the World Bank, as the State Minister responsible for the economy. Mr Derviє prepared a new economic programme and restarted negotiations with the IMF. On 15 May 2001 the IMF Board approved a new economic programme, and agreed additional financial assistance for Turkey of US $8000 million. The main purpose of the programme is to sustain financial stability in the short term in order to enable the Treasury to roll-over its huge debt stock. It will also tackle the structural problems of the banking sector by restructuring debt-ridden state-owned banks and forcing the closure of former private sector banks which have been taken over by the Government.
3.4 In February 2002 the IMF approved an extra US $12,000 million to Turkey, raising Turkey's debt to the organisation to $31,000 million; Turkey's foreign debt increased to 78% of GDP by the end of 2001. As a result of the financial crisis, GDP declined by 8.5% in 2001, although the Turkish Government envisaged renewed growth, at 4%, in 2002.
3.5 The Financial Times has noted that a Byzantine bureaucracy and a reputation for corruption have won Turkey the dubious privilege of being ranked the fourth least transparent economy in the world - after China, Russia and Indonesia. PricewaterhouseCoopers measures the impact of the level of transparency on investment, and finds that Turkey's opacity figure of 74 (with 0 representing complete transparency, and 100 complete opacity) is very high. Transparency International's "Corruption Perceptions Index 2002" records that Turkey is 64th in a list of 102 countries which are ranked according to perceptions of the degree of corruption, as seen by business people, academics and risk analysts; Turkey's score is 3.2 (the range being 10 (highly clean) to 0 (highly corrupt)). (For comparison, UK is ranked 10th in the list, with a score of 8.7). Turkey is understood to have a very large black economy that underpins the real economy. The comment has been made that only a small proportion of Turkish businesses (e.g. those linked to international companies) appear to operate fully above board and to pay all taxes. The October 2002 EC “Regular Report on Turkey's Progress Towards Accession” notes that several steps have been taken to prevent corruption and corrupt practices. It praises the Government's adoption in January 2002 of an Action Plan on Enhancing Transparency and Good Governance in the Public Sector (which has implications for preventing corrupt practices), and says that due attention should now be given to its implementation."

Document(s): Open document

30.05.2002 - Source: European Parliament

European Parliament: ("Note on the Political and Economic Situation in Turkey and its Relations with the European Union") [#9505], [ID 13209]

Document(s): Open document

15.04.2002 - Source: Council of the European Union

Netherlands delegation to CIREA: Economic crisis ("Note from the Netherlands delegation to CIREA: Official general report on Turkey, January 2002" Rf. 7838/02") [#7991], [ID 13210]

"In February 2001 Turkey was hit by the most serious economic crisis since it became a republic, sparked off by public disagreement between the President and the Prime Minister. Within a short space of time, interest rates rocketed, share prices plummeted and, after being allowed to float freely, the Turkish lira lost almost 50% of its value against the US dollar. In April 2001 Kemal Derviş from the World Bank was appointed as a junior minister in charge of economic affairs. Under him, a recovery programme has been drawn up to put the Turkish economy back on an even keel. The programme includes wage restraint, restructuring of the banking industry and extensive privatisation. Both the IMF and the World Bank promised financial aid totalling just over ten billion dollars, provided Derviş's programme is strictly adhered to. So far, Turkey has honoured its commitments to the IMF and the World Bank, with many necessary legislative amendments now having been introduced. The two institutions have thus in the meantime disbursed several billion dollars in loans to Turkey.
In his reform plans, involving many amendments to a raft of legislation, Derviş has on a number of occasions come up against reluctance or resistance on the part of the coalition. The nationalist MHP, in particular, strongly objected to various privatisations, as less state control of big business undermines the system of patronage widely practised throughout Turkey and especially deep-rooted in MHP circles. The MHP Minister for Transport and Communications, Enis Öksüz, for instance, attempted to thwart the privatisation of state-run Türk Telekom. Partly under pressure from the IMF and the World Bank; which deferred payment of promised loans, in July 2001 the government finally agreed to legislation opening the way for Türk Telekom's privatisation, and Öksüz was removed from office. The junior minister in charge of privatisation, Yüksel Yalova of the ANAP, was also dismissed for standing in the way of Derviş's reform plans, after trying to block legislation reorganising the tobacco industry. For a few months, the economic crisis and ensuing recovery programme monopolised Turkish politics, with many other items on the political agenda being left aside."

Document(s): Open document