OECD URVEY: TURKEY OECD OCDE 1993 ECONOMIC TURKEY ORGANISATIONFORECONOMICCO-OPERATIONANDDEVELOPMENT ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT Pursuant to Article 1 oftheConvention signed in Paris on I4th December 1960, and which cameinto forceon 30th September 1961, the Organisation for Economic Co-operation and Development (OECD) shallpromotepoliciesdesigned: to achieve the highest sustainable economic growth and employment and a rising standard ofliving in Member countries,whilemaintainingfinancial stability, andthusto contributetothedevelopmentoftheworldeconomy; to contribute to sound economic expansion in Member as well as non-membercountries in the process ofeconomic development;and to contribute to the expansion of world trade on a multilateral, non-discriminatory basis in accordance with international obligations. The original Member countries of the OECD are Austria, Belgium, Canada, Denmark, France, Germany, Greece, Iceland, Ireland,Italy,Luxembourg,theNetherlands,Norway,Portugal,Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. The following countries became Members subsequently through accession at the dates indicated hereafter: Japan (28th April 1964), Finland (28th January 1969), Australia (7th June 1971) and New Zealand (29th May 1973). The Commission of the European Communities takes part in the work ofthe OECD (Article 13 ofthe OECDConvention). Publiéégalementenfrançais. ©OECD 1993 Applicationsforpermissiontoreproduceortranslate allorpartofthispublicationshouldbemadeto: HeadofPublicationsService,OECD 2,rueAndré-Pascal,7S775PARISCEDEX 16,France Contents Introduction 9 I. The economy in 1992 and near-term prospects 10 Revival of economic activity 10 Solid external positions 10 Inflation-prone economy 14 Prospects 16 II. Economic policy 19 Main features ofpublic-sector operations in 1992 19 Monetary policy 26 Recent progress in financial market reform 34 in. The labour market 36 Introduction 36 Main features of the labour market 36 Labour supply 37 Labour demand 45 Unemployment 51 Education 53 The wage formation process 60 Recent labour market issues 65 IV. Conclusions 67 Notes 72 References 74 Annexes I. Public-sector accounts 75 IL Turkish labour market statistics 86 III. Calendar of main economic events 88 Statistical and structural annex 93 Tables Text 1. Supply and use of resources 12 2. Balance of payments 13 3. Prices 15 4. Short-term projections 17 5. Public sector borrowing requirements 20 6. Central Bank credits 28 7. Assets and liabilities of the Central Bank 29 8. Money and credit 30 9. Restructuring the Central Bank balance sheet 31 10. Deposit interest rates 32 11. Main labour market indicators 38 12. Main demographic indicators, 1927-90 40 13. Growth and structure of the population 40 14. Male and female participation rates 42 15. Employment by sectors and status 45 16. Employment and productivity in the long run 49 17. Employment in State economic enterprises 50 18. Male and female unemployment 52 19. Indicators of the quality of labour 54 20. Educational attainment: an international comparison 56 21. Expenditure on education by international comparison 59 22. Indicators of industrial relations 60 23. Real wages and real labour cost 23 Annexes Al. Central government budget 76 A2. Central government budget revenues 79 A3. Financial account of the State economic enterprises 82 A4. Consolidated account of extra-budgetary funds 84 Statistical and structural annex A. National product 94 B. Supply and use of resources 95 C. Gross fixed investment by sector 96 D. Industrial production 97 E. Prices 98 F. Imports by commodities 99 G. Exports by commodities 100 H. Geographic distribution of foreign trade 101 I. Balance of payments 102 J. External debt of Turkey 103 K. Money and banking 104 L. Public sector borrowing 105 M. Central government budget 106 N. Central government budget revenues 107 O. Financial account of the State economic enterprises 108 P. Consolidated account of extra-budgetary funds 109 Q. Dollar exchange rate of the Turkish lira 110 Diagrams Text 1. Macroeconomic performance 11 2. General government deficit and debt 21 3. Exchange rate developments 33 4. Labour force participation and unemployment 41 5. Participation rates by age groups 43 6. Unemployment by age groups 53 LU CD < û. < CQ BASICSTATISTICS OFTURKEY THELAND Area(thousandsq.km) 781 Majorcities,1990(thousandinhabitants) Agriculturalarea(thousandsq.km) 280 Istanbul 7427 Forests(thousandsq.km) 202 Ankara 3236 Izmir 2680 THEPEOPLE Population,1991 (thousands) 57700 Civilianlabourforce,1991 (thousands) 19438 Persq.km,1991 74 Civilianemployment 17898 Annualaveragerateofchange Agriculture,forestry,fishing 8713 ofpopulation,1991 2.4 Industry 2836 Construction 905 Services 444 PRODUCTION GNP,1991 (TLbillion) 453256 OriginofGDP,1991 (percent) Perhead(US$) 1884 Agriculture,forestry,fishing 16.5 Grossfixedinvestment,1991 Industry 26.9 (TLbillion) 102393 Construction 5.5 PercentofGNP 22.6 Services 51.1 Perhead(US$) 42.6 THEGOVERNMENT Publicconsumption,1991 Publicdebt,end-1991 (percentofGNP) 56.0 (percentofGNP) 15.9 Domestic 25.8 Centralgovernmentcurrentrevenue, Foreign 30.2 1991 (percentofGNP) 21.3 FOREIGNTRADE Commodityexports,1991,fob Commodityimports,1991,cif (percentofGNP) 12.6 (percentofGNP) 19.4 Mainexports(percentoftotalexports) Mainimports(percentoftotal imports) Agriculture 19.8 Machineryandequipment 26.7 Mining 2.1 Transportequipment 7.4 Industry 78.1 Basemetals 11.9 Oil 11.7 Monetaryunit: Turkishlira CurrencyunitperUS$, averageofdailyfigures: 1990 2607.62 1991 4169.85 1992 6860.59 Note: Aninternationalcomparisonofcertainbasicstatisticsisgiveninanannextable. ThisSurveyisbasedon theSecretariat'sstudyprepared for the annual review of Turkey by the Economic and DevelopmentReview Committeeon8thFebruary1993. After revisions in the light ofdiscussions during the review, final approval ofthe Surveyforpublication was givenbythe Committeeon22ndFebruary 1993. The previous Survey of Turkey was issued in July 1992. Introduction When the Committee examined Turkey in April 1992, the economy was emerging from the stagnation of 1991 as political uncertainties were dissipating and household incomes were boosted by large wage gains and increases in agricultural revenues. Positive effects on aggregate demand notwithstanding, big wage settlements and generous agricultural support prices fuelled inflationary pressures both directly and indirectly through their impact on the budget deficit, which was largely monetised. Macroeconomic policies accommodated a rise in inflation, but with the Turkish lira allowed to depreciate in real terms the current external balance remained roughly unchanged abstracting from the effects ofthe Gulf War-related grants. On presently known policy intentions of the government and a gradual projected recovery in the world economy, output could continue to grow at something like 4'A per cent, with the external position remaining solid. Inflation is projected to come down modestly but only insofar as the budgetary situation is put under tight control. The government has been marking time in putting into place fundamental reforms of the economic system, and without these, lasting improvement in living standards would be difficult to attain. The present Survey first reviews the economic situation in 1992 and presents an outlook to 1994. Chapter II discusses main features ofpolicy devel¬ opments. This is followed by an overview ofthe labour market in Turkey, which differs from that found in most OECD countries in many respects. The Survey concludes with a discussion of key policy issues.