Some economic questions ahead of June elections

Some economic questions ahead of June elections

There has been almost nothing more than the political parties’ electoral promises and the resulting discussions in the media outlets ahead of the elections. Interestingly, their economic programs have been reviewed and criticized thoroughly this time. They should be as well, but this is quite new for Turkey to focus on economic issues in detail. 

New promises, whether empty or not, are giving hope to economic and business circles, who are really in need of these refreshing ideas and proposals. I just hope these new ideas are heard by the masses, who are the main addressee of the planned policies. 

The point is whether we’ll see the new government take a number of crucially important steps to maintain the economic system. Admit or not, the Turkish economy has been in an underperforming cycle when compared to many other emerging markets. This cycle is more like a trap. The country is, however, quite far away from fixing the problems that paved the road to the trap-like deadlock. 

I call it deadlock, as the solution proposals are quite obvious, but nobody has done anything to implement them in a determined way for a long time. 

First of all, Turkey needs to develop new sources of growth as the good yields of the structural reforms of the 2000s are about to taper. GDP growth has recently been driven by domestic demand, a construction boom and the rise in the service economy. With the slowing down in the external financing inflow to the country, these factors have begun to derail. 

Many economists and businesspeople offer a new production model which is based on higher added value and innovation. Is it possible to achieve this in the medium-term with a collapsing educational system and a non-proportional urbanization wave, which has still caused thousands of people to move to the biggest cities to find a job, with their “souls needing to be waited to catch up their bodies.” 

You know the story. Academic studies have found that Turkey’s economic growth is held mainly back by low productivity, with human capital being the binding constraint on productivity. While Turkish students’ scores in international PISA tests have improved in the last years, they are still lower than peers’ in countries with similar GDPs.

At the same time, Turkish employers experience difficulty in filling jobs due to the unavailability of the right skills. According to the Talent Shortage Survey 2013 implemented by Manpower Group, 58 percent of Turkish employers experience difficulty filling jobs, compared to 35 percent at the global average. Similarly, 56 percent of Turkish employers with vacancies mention that one reason for not filling them is the lack of skills, which is the highest share in a list of comparator countries (McKinsey, 2012). 

Second, Turkey needs fairly comprehensive judicial reform. Everybody has been emphasizing the urgent need for this reform, even cabinet members. The point is who will make this judicial reform and whether there is a possibility for the future new government to make this reform, which will secure democratic ideals, freedoms and liberties as well as increase the competitiveness level of Turkey. 

I just hope the new government will take solid steps in these areas, just like many others.