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Tuesday, October 28, 2003

Turkey's Quiet Productivity Revolution

Most commentators are pretty 'bullish' on China and India these days, so as well as the obvious cases, I'm trying to pick some other 'revelation' economies. On my short list: Thailand, Turkey and Brazil. Here's the first of two articles bringing some good news for a change:

The Turkish economy has been enjoying a vigorous rebound. After the great recession that resulted in a sharp break in economic performance and lowered real gross domestic product by 7.5% in 2001, the Turkish economy is once again picking up steam. Real GDP rose by 7.8% last year and 5.8% in the first half of this year. We may indeed be witnessing a paradigm shift triggered by fundamental changes, such as political consolidation and wide-ranging economic and institutional reforms. In our opinion, improving macroeconomic outlook and reforms required for the EU accession process are increasing the country’s potential growth rate. Though the realisation of full potential on a sustainable basis requires productivity-enhancing microeconomic adjustment, we are seeing early, but encouraging signs of a true turnaround.

The surge in productivity growth in recent years supports our positive assessment. As Paul Krugman once remarked, “Productivity isn’t everything, but in the long run, it is almost everything.” There is a discernible improvement in Turkey’s rate of productivity growth the single most important indicator of any nation’s economic performance. Output per worker has increased by 25.8% after the 2001 crisis, and total factor productivity, which reflects increases in productivity due to technological improvements, accelerated from an average of 0.5% in the 1990s to 4.7% in the last two years. In our view, the growth of labour productivity, which surged from less than 4% a year over the previous decade to an annual rate of 8.5%, is a case in point that the Turkish economy is gradually entering a new era with a higher potential growth rate.
Source: Serhan Cevik, MS Global Economic Forum

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