World Bank2012-06-142012-06-142008-04https://hdl.handle.net/10986/8017This Country Economic Memorandum (CEM), prepared in collaboration with the Turkish authorities, summarizes recent accomplishments in achieving high growth and analyzes remaining public policy challenges and options available to the authorities to meet these challenges. The country seeks to double the nominal per capita income of its population by 2013. It wants this rapid growth to be inclusive of all segments of society, regions, and economic sectors-especially through improved labor market performance leading to more and better jobs in the economy. At the same time, the authorities want to improve the quality of public services which they see as an important complement to economic growth in improving quality of life. They also believe that the potentially negative environmental consequences of the period of rapid growth ahead need to be managed so that the positive welfare gains from higher per capita income levels do not become eroded by environmental nuisances. Turkey has succeeded in restoring macroeconomic stability and rapid growth, it has been recovering from crisis in 2001 and grew at 7.5 percent per year on average during 2002-2006. In addition, certain dimensions of public sector governance are instrumental in improving quality of life and promoting competitiveness in Turkey including, for example, food safety and environmental protection. Further strengthening of the legal framework and institutions fighting corruption could improve the investment climate, the efficiency of the public sector, and popular support to further reforms, and continuous macroeconomic stability is a necessary (but not sufficient) condition for sustainable growth. Strong fiscal discipline and monetary policy have reduced chronic inflation to below 10 percent in 2005. Public debt has also been reduced and its sustainability has improved. Accordingly, the resilience of the Turkish economy to shocks has improved as demonstrated by the rapid recovery from turmoil in international markets in the summer of 2006 and, more recently, in the summer-autumn of 2007.CC BY 3.0 IGOAGRICULTURAL OUTPUTAGRICULTUREANNUAL GROWTHANNUAL IMPORTSASSETSAVERAGE PRODUCTIVITYBALANCE OF PAYMENTSBANK LENDINGBANKING REGULATIONBASE YEARBILLCAPITAL FLOWSCAPITAL FORMATIONCAPITAL GOODSCAPITAL GOODS IMPORTSCAPITAL INFLOWSCAPITAL STOCKCARBONCARBON EMISSIONSCENTRAL BANKCOALCOMPARATIVE ADVANTAGECOMPETITIVENESSCONSOLIDATIONCONSTANT RETURNS TO SCALECONSUMER PRICE INDEXCONSUMPTION GOODSCPICURRENCYCURRENCY SUBSTITUTIONCURRENCY TRANSACTIONCURRENT ACCOUNTCURRENT ACCOUNT BALANCECURRENT ACCOUNT DEFICITCURRENT ACCOUNT DEFICITSCURRENT ACCOUNT DYNAMICSDEBTDEBT SUSTAINABILITYDEMAND GROWTHDEPRECIATIONDEVELOPMENT AGENCIESDEVELOPMENT POLICYDISINFLATIONDISPOSABLE INCOMEDOMESTIC CREDITDOMESTIC DEMANDDOMESTIC DEMAND GROWTHDOMESTIC MARKETSECONOMETRIC ESTIMATESECONOMIC ACTIVITYECONOMIC COOPERATIONECONOMIC CRISISECONOMIC GROWTHECONOMIC POLICIESECONOMIC POLICYECONOMIC SHOCKSELASTICITIESELASTICITYELECTRICITY DEMANDEMERGING MARKET ECONOMIESENERGY CONSUMPTIONENERGY EFFICIENCYENTERPRISE PERFORMANCEENVIRONMENTALENVIRONMENTAL PROTECTIONEQUILIBRIUMEQUILIBRIUM LEVELEXCHANGE RATEEXCHANGE RATE APPRECIATIONEXCHANGE RATE SHOCKSEXPENDITURESEXPLANATORY VARIABLESEXPORT CAPACITYEXPORT GROWTHEXPORT GROWTH RATESEXTERNAL BALANCEEXTERNAL COMPETITIVENESSEXTERNAL DEBTEXTERNAL DEFICITEXTERNAL DEMANDEXTERNAL SHOCKSFARMSFINANCIAL CRISISFINANCIAL MARKETFINANCIAL MARKETSFINANCIAL SECTORFISCAL BALANCESFISCAL DISCIPLINEFISCAL REFORMSFOOD PRICESFOREIGN CURRENCYFOREIGN CURRENCY LOANSFOREIGN DIRECT INVESTMENTFOREIGN EXCHANGEFORESTRYFUNDAMENTAL DETERMINANTSGDPGDP PER CAPITAGLOBAL MARKETGLOBAL MARKETSGLOBAL TRADEGNPGOLDGRAVITY MODELSGROSS DOMESTIC PRODUCTGROSS FIXED CAPITAL FORMATIONGROSS NATIONAL PRODUCTGROSS VALUEGROWTH PERFORMANCEGROWTH POTENTIALGROWTH PROJECTIONSGROWTH RATEGROWTH RATESHUMAN CAPITALHUMAN RESOURCESIMBALANCEIMBALANCESIMPORTIMPORTSINCOMEINDUSTRIALIZATIONINFLATIONINFLATION DYNAMICSINFLATION FORECASTINFLATION TARGETINFLATION TARGETINGINFLATION TARGETING REGIMEINFLATIONARY EXPECTATIONSINFLATIONARY PROCESSINSURANCEINTEREST RATESINTERMEDIATE GOODSINTERNATIONAL MARKETINTERNATIONAL MARKETSINVESTMENT CLIMATEINVESTMENT EXPENDITURESINVESTMENT RATEJUDICIAL REFORMKEY RISKSLABOR COSTSLABOR FORCELABOR MARKETLABOR MARKETSLABOR PRODUCTIVITYLAND USELEGAL FRAMEWORKLEVEL OF INVESTMENTLOCAL AUTHORITIESLOSS OF COMPETITIVENESSMACROECONOMIC MANAGEMENTMACROECONOMIC STABILITYMARKET ECONOMIESMINIMUM WAGESMONETARY FUNDMONETARY POLICYMONEY SUPPLYMORTGAGEMPCNATIONAL INCOMENATIONAL SAVINGNET EXPORTSOILOIL PRICEOIL PRICESOUTPUT GAPPER CAPITA INCOMEPOLLUTIONPOLLUTION CONTROLPOPULATION GROWTHPOTENTIAL OUTPUTPOVERTY REDUCTIONPRICE INDEXPRIVATE CONSUMPTIONPRIVATE CREDITSPRIVATE INVESTMENTPRODUCTION FUNCTIONPRODUCTIVITYPRODUCTIVITY GROWTHPUBLIC DEBTPUBLIC EXPENDITUREPUBLIC INVESTMENTPURCHASING POWERPURCHASING POWER PARITYRAPID GROWTHREAL EFFECTIVE EXCHANGE RATEREAL EXCHANGE RATEREAL GDPREAL IMPORTSRECESSIONRESOURCES MANAGEMENTRISK FACTORSSAVINGSSLOWDOWNSTABLE GROWTHSTOCK MARKETSTRUCTURAL REFORMSTRUCTURAL REFORMSSUPPLY SHOCKSSUPPLY SIDESURPLUSSURPLUSESSUSTAINABLE GROWTHTAX EXPENDITURESTAX REFORMTAX REVENUESTIGHT MONETARY POLICIESTIGHT MONETARY POLICYTOTAL EXPORTSTOTAL FACTOR PRODUCTIVITYTRADABLE GOODSTRADE BALANCETRADE DEFICITTRADE INTEGRATIONTRADE OPENNESSTRADE PERFORMANCETREATYUNCERTAINTIESUNEMPLOYMENTUNEMPLOYMENT RATEUNEMPLOYMENT RATESVALUE ADDEDWASTE MANAGEMENTWorld Bank10.1596/8017