Turkey’s new Medium-Term Economic Program promises miracles

The Erdogan administration unveiled its three-year economic policy guidelines, which is the most important and unfortunately the only document which states economic goals and the policies needed to achieve them.


Turkey’s economy is projected to expand 9% this year and grow a further 5% in 2022, according to the country’s medium-term economic program published in the Official Gazette late on Sept. 5.


The government is aiming for growth of 5.5% in 2023 and 2024, according to the three-year program, while the average gross domestic product (GDP) growth rate target is 5.3%.


Turkey’s GDP jumped 21.7% year-on-year in the second quarter of 2021, the highest annual growth rate since 1999, according to official data released last week.


Commenting on the program, Treasury and Finance Minister Lütfi Elvan said on Twitter: “We will further strengthen macroeconomic stability for durable growth led by the private sector.”


Turkey’s annual inflation, which climbed to 19.25% in August from 18.95% in July, is projected to hit 16.2% by the end of this year.


It is expected to fall to 9.8% by the end of 2022, according to the new economic program, while the year-end targets for 2023 and 2024 are 8% and 7.6%, respectively.


The current account deficit to GDP ratio is projected to be 2.2% next year, further narrowing to 1.5% in 2023 and 1% in 2024.


The GDP per capita is expected to surpass $11,000 by 2024, according to the program. The figure will be $9,947 in 2022, $10,703 in 2023, and $11,465 in 2024.


The government is aiming for the GDP to exceed $850 billion in 2022, before hitting $975 billion in 2023 and topping $1 trillion in 2024.


Turkey’s GDP with current prices is projected to be around $801 billion this year, while it stood at $717 billion in 2020, according to the Turkish Statistical Institute.



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The U.S. dollar/Turkish lira exchange rate will be around 8.30 by the end of this year and increase to 9.27 in 2022, 9.77 in 2023, and 10.26 in 2024, according to the program.


The country’s exports target is $230.9 billion for 2022 and grows to $255 billion by 2024.


Turkey’s budget deficit, which has widened due to the impact of the coronavirus pandemic, is projected to increase in the coming few years.


It is expected to be 230 billion Turkish liras ($27.7 billion) this year, with a target of 278.4 billion liras ($30 billion) for 2022, 290.2 billion ($29.7 billion) in 2023, and 294 billion liras ($28.7 billion) in 2024.



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The unemployment rate in Turkey, which stood at 10.6% in June, will hit 12.6% by the end of this year, according to the program’s estimates.


The government aims to bring it down to 12% next year, 11.4% in 2023, and 10.9% in 2024.


The program was met with derision by economists across the board, because it is inconsistent. Turkey’s long-run growth rate is estimated at 3.5% per annum. Accelerating GDP growth to 5.3% while reducing inflation, budget deficits and current account deficits requires an innovative, rapid and publicly-accepted structural reform drive. This way, productivity per worker would increase, allowing Turkey to produce a higher GDP at a lower rate of inflation.


There is no mention of such a program in the MTEP Document. Instead, the few pages devoted to required policies is merely a cut-paste from previous programs.


Turkey has never had any success in meeting either the MTEP, or Central Bank inflation targets.


More commentary  is coming.



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Published By: Atilla Yeşilada

GlobalSource Partners’ Turkey Country Analyst Atilla Yesilada is the country’s leading political analyst and commentator. He is known throughout the finance and political science world for his thorough and outspoken coverage of Turkey’s political and financial developments. In addition to his extensive writing schedule, he is often called upon to provide his political expertise on major radio and television channels. Based in Istanbul, Atilla is co-founder of the information platform Istanbul Analytics and is one of GlobalSource’s local partners in Turkey. In addition to his consulting work and speaking engagements throughout the US, Europe and the Middle East, he writes regular columns for Turkey’s leading financial websites VATAN and www.paraanaliz.com and has contributed to the financial daily Referans and the liberal daily Radikal.