- After a strong post-crisis recovery, Turkish growth slowed sharply to 2.2 per cent in 2012. The success of Prime Minister Erdoğan’s government has been rooted in economic prosperity, which will remain a central issue for his popularity.
- Turkey’s economy has been boosted by the rise of socially conservative, exportoriented entrepreneurs known as the ‘Anatolian Tigers’, nurtured by business networking through Islamic social networks, return migration from Germany, freemarket economic policies, and institution-building by the previous secular-inclined establishment.
- Other strengths of the Turkish economy include successful strategies for the movement of labour from low- to higher-productivity sectors and poverty reduction.
- The sources of ‘easy’ economic growth from macroeconomic stability and fiscal discipline have been largely exhausted, however. Turkey’s consumer-driven economic model cannot sustain consistently high growth rates and is being undermined by low investment and savings rates, limited export sophistication, pervasive gender inequality and inefficient use of its ‘demographic dividend’.
- Turkey’s growth potential will be constrained unless it implements productivity-enhancing reforms before the problems of an ageing population start to be noticeable around 2025. To avoid reform ‘fatigue’, it should focus on tackling the main bottlenecks to economic growth: the quality of human capital, and incomplete reform of governance and institutions.