ANKARA
Turkey’s stronger than expected first quarter growth figure is not as encouraging as it seems, World Bank Turkey director Martin Raiser said on Thursday, pointing to the domestic consumption-led nature of the growth.
Turkey’s economy saw unexpectedly strong growth at 2.3 percent in the first quarter of the year, the Turkish Statistical Institute said in a statement Wednesday.
“Of course what is welcome is that you see some recovery in domestic demand and also some recovery in net exports,” Raiser said in its institute’s end of fiscal year review.
“But when you break that down you see recovery in consumption is government consumption. Private consumption has recovered a little bit, not so much,” he added.
Raiser explained that investments as well as net exports showed a mixed picture and that longer-term sustainable growth without investments and robust exports was not a way to deal with problems.
“When you looked at the net exports picture at one level, net exports contributing positively to the growth is encouraging but once you strip the gold exports out - that is also showed by the recent current account data - the picture for net exports looks a little more mixed,” he said.
Regarding the effects of a crisis in Turkey’s largest export market - the EU - Raiser pointed out that positive effects of a strengthening recovery in this market was offset by the euro’s depreciation.
Raiser urged Turkey to improve productivity, competitiveness, and gain shares in export markets, through structural reforms, to move the country to the level of high-income countries.
“Basically, in the short run, the most important thing is to do something to stabilize investors’ confidence. I think investors need to be reassured about the commitment to the rule of law, they need to be reassured about what is the trajectory, what is the plan for economic policy going forward,” he said.
Raiser said reforming the labor market to make it more flexible was the second most important structural reform to take on in order for job creation to continue as it has in the last five years.
“It is always difficult to place constraints on discretion of policy makers but if you want to move on to a high-income country then basically those constraints are necessary because they create the predictability for investors to know what the investment environment would be like,” he added.
