1. Prof. Dr. Mustafa Acar
Kirikkale University
Department of Economics
01.11.2010 EFW, Cairo 1

2. plan
 Facts about Turkey
 Importance of Turkey for the MENA region
 Recent political and economic reforms in Turkey
 Macro indicators
 Economic freedom performance
 Conclusion
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3. 01.11.2010 EFW, Cairo 3

4. 01.11.2010 EFW, Cairo 4

5. Facts about Turkey
 Population: 72 million (98% Muslim)
 Location: Anatolia; bridge between Asia and Europe
 Political system: “parliamentary democarcy” vs.
“bureaucratic guardianship regime”!
 Economic system: transition from centrally planned to
free market economy
 International relations: UN, NATO, OECD, UN
security council; EU candidate
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6. GDP (PPP)
 $960 billion (2010)
 $874.5 billion (2009 est.)
 $926.4 billion (2008 est.)
 Comparison to the world: 16
 Comparison to Europe: 6
 Target: among the biggest 10 by 2023
 Projection: 4th by 2050!
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7. GDP p.c.
 $13,300 (2010 est.)
 $11,400 (2009 est.)
 $12,200 (2008 est.)
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8. breakdown of GDP (2009)
 agriculture: 9.3%
 industry: 25.6%
 services: 65.1%
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9. Public debts
 46.3% of GDP (2009 est.)
 40% of GDP (2008 est.)
 Maastricht criteria: 60%
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10. Twin deficits (2009)
 CAB: -2% of GDP
 Budget Deficit: -5.5% of GDP
 -1.0% (2008)
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11. Importance of Turkey for the
MENA
 Strong historical, cultural ties
 Ottoman heritage: 1513-1922
 Family ties in neighboring countries
 “Muslim democracy”
 Recent efforts to strengthen ties: visa agreements,
investments, trade
 Only country in the region who have diplomatic
relations with Iran, Syria, Israel, Palestine..
 Pipelines: Kirkuk-Yumurtalık, Baku-Tiblisi-Ceyhan,
Nabucco..
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12. What’s happening in Turkey?
 Dramatic changes:
 Political
 Economic
 Legal reforms
 Making peace with:
 History
 Neighbors
 Own people (Kurds, Alevis, Sunnis, non-Muslims)
 Healing from “historical lobotomy” (G. Fuller)
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13. Factors behind transformation
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14. External factors
 Globalization
 End of Cold War
 Changing expectations
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15. Internal factors
 Özal reforms (1980s)
 Lessons from experience of the past crises (1994, 99,
2000-01)
 Emergence of a new middle class (conservative-
religious bourgeoisie)
 “Anatolian Tigers”
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16. Recent reforms
 Political reforms
 Legal reforms
 Economic reforms
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17. Political and legal reforms
 Constitutional reform (Sep. 12, 2010)
 Legal reforms: reducing the role of military in political
affairs
 Independent and impartial judiciary
 End bureaucratic guardianship regime
 New foreign policy perspective: Zero-problem with
neighbors
 “Democratic opening” process: peaceful solution to
Kurdish problem
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18. Economic reforms
 Fiscal discipline: BD: 3%,
 IMF condition: 6.5% primary surplus
 Autonomous Central Bank: inflation-targeting
 New currency: removing 6 zeros from TL
 Privatizations: $40 b
 “fiscal rule”: on the way…
 Promoting investments, deregulations..
 Institutional and legal reforms for EU adjustment
(negotiatons)
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19. Success story
 Improvements in many macro indicators
 Growth accelerated
 GDP pc increased
 Inflation fell down
 Budget deficits narrowed
 Public debts shrank
 Interest rates fell
 Exports increaed
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20. Accelerated growth
 (1993-2001): 3%
 (2002-2008): 6.1%
 2009: -4.7%
 2010: 10.3%
 3rd fastest growing economy in the world
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21. Growth performance
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0
1
2
3
4
5
6
7
1993-2001 2002-2008
growth (annual average, %)

22. Income pc has gone up
 pc GDP
 2001: $2,160
 2010: $13,300
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23. GDP pc
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0
2000
4000
6000
8000
10000
12000
14000
2001 2010
GDP pc ($)

24. Budget deficit narrowed
 2001: 16% of GDP
 2008: 1%
 2010: 3%
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25. Budget deficits
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0
2
4
6
8
10
12
14
16
18
2002 2010
budget deficit (% of GDP)

26. Public debts under control
 2001: 80% of GDP
 2009: 46.3%
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27. Public debts
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0
10
20
30
40
50
60
70
80
90
2002 2010
public debts (% of GDP)

28. Inflation fell down
 single digit inflation after 3 decades!
 CPI
 (2002) 45,0%
 (2010) 9.2%
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29. Price stability
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0
5
10
15
20
25
30
35
40
45
50
2002 2010
inflation (CPI)

30. Exports increased
 (2002): 36 (billion $)
 (2008): 132
 (2009): 102
 (2010): 115
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31. Exports
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0
20
40
60
80
100
120
140
2002 2008
exports (b $)

32. Other macro indicators
 Interest rates (%): (2002) 44, (2010) 6.5
 FX reserves: 2002: $26, 2010: $75 b
 Construction firms (outside): (1972-2002): $1.5,
2009: $23.6 b
 Stock exchange (index): (2009): 27,000; (2010): 71,000
 FDIs: long term average: below $1 b, 2007: $22 b (5th
among developing countries)
 Unemployment (% ): (2002) 10.3, (2010) 10.6
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33. Areas of economic freedom
 Size of government
 Legal structure and property rigths
 Sound money
 Free trade
 Regulation
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34. Overall efw score: Turkey
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0
1
2
3
4
5
6
7
8
1980 1985 1990 1995 2000 2005 2007 2008

35. EFW trends (Turkey)
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0
1
2
3
4
5
6
7
8
9
1980 1985 1990 1995 2000 2005 2007 2008
size og govt
prop.rights
sound money
free trade
regulation

36. Areas of improvement
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0
1
2
3
4
5
6
7
8
9
size og govt prop.rights sound money free trade regulation
2000
2008

37. Conclusion
 Turkey is an important country and political actor in
the region
 Going through a tremendous political, legal and
economic transformation process
 Have big targets: EU membership, 10th biggest
economy in the world, peace and stability..
 Measurable consequences of the reforms
 There is still a long way to go
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38. Thank you 
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