2018 OECD Economic Surveys: Turkey 2018

image of OECD Economic Surveys: Turkey 2018

The Turkish economy bounced back strongly after the failed coup in July 2016 but going forward growth is set to be closer to potential. The exchange rate has depreciated considerably, inflation is high and so is the current account deficit. Growth has been overly dependent on consumption and external savings and should be rebalanced by improving export performance. There is ample room to improve the quality of governance, including with respect to fiscal, monetary and macroprudential policy. Progress in these areas would help bring about disinflation and reduce risk premia, thus lowering financing costs. Coupled with increased foreign direct investment, this would contribute to improve the quality of business capital formation, and to generate high-quality sustainable jobs for the rapidly expanding labour force.



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Executive summary

Growth is strong and living conditions have improved amid imbalancesThe Turkish economy has grown very fast in the past two years despite adverse shocksSustained job creation outside agriculture, which accelerated in the 2010s, has improved well-being, notably in less-developed regionsMacroeconomic policies have become pro-cyclicalMacroeconomic policies have been strongly expansionary since the coup attempt in mid-2016Business sector modernisation is key to rebalance the economy and improve social cohesionRebalancing the economy, while keeping up growth, calls for improved export performanceLarge numbers of successful medium-sized firms have emergedFormalisation, digitalisation and deleveraging are key to improve firm performanceThe government has committed to bringing Turkey’s framework for doing business closer to international good practiceComprehensive education, governance and regulatory reforms would foster domestic convergence and social cohesion



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