Turkey’s story should be about investment, productivity: MIT professor

Hülya Güler – ISTANBUL

Turkey’s non-investing economy is not sustainable, according to Daron Acemoğlu, an economy professor from the Massachusetts Institute of Technology (MIT), who highlighted that Turkey’s “story” should be about investment and productivity, not the non-investing “bad” growth that comes from domestic consumption.

“Turkey is currently growing without investment. This is a very interesting and a difficult thing. Only Turkey can do this as of now. The worst case scenario is to continue with this kind of growth. The decisions of the [U.S.] Federal Reserve System [Fed] prompted Turkey to hold on to the bad growth story even more. But now we need a new story, and that is ‘investment’ and ‘productivity,’” said Acemoğlu, adding that Turkey should leave a growth path based on “non-investing” and “domestic consumption made by debt.”

Visiting Istanbul to attend the “CEO Club” meeting, Acemoğlu answered daily Hürriyet questions on April 17.  
Acemoğlu said it was not possible for Turkey to reach its aimed growth with only Istanbul and five to six big companies, as he laid out the formula of growth by saying: “Turkey has a growth potential [of] more than 4 percent. It had many productive firms. It is possible to diversify and enlarge its investments in numerous sectors. But this would not happen only by Istanbul and some five to six holdings. At least five to six Anatolian tigers should emerge from each city and these should use the right technology. A way to increase direct investment, rather than hot money should be found,” said Acemoğlu.

Also touching upon the interest rate debates in Turkey, Acemoğlu said that lowering interest rates would be a mistake. “I think we should go toward the other side. I mean increasing the rates is better. But I have been saying this for four to five years, because the problem is not inflation; inflation is a result. The inflation shows that, right now, everything in Turkey is growing based on credits and that investments are not done correctly,” said Acemoğlu.