Turkey needs to invest more in education and research, deepen trade agreements and strengthen the rule of law if it is to increase productivity and boost its exports, the OECD said yesterday.
In a broad survey, the Organisation for Economic Co-operation and Development urged the government to put its promised reforms in education, governance, labour and taxes into action, noting that they had been delayed by repeated elections.
“Turkey is no longer experiencing ‘boom-and-bust’ cycles, but external deficits expanded and the net external investment position has deteriorated somewhat over the past decade,” the OECD said.
“In a difficult political context and amid four national elections over 2014-15, implementation lagged.”
Finance Minister Naci Agbal told Reuters last month Turkey would take “swift and bold” economic decisions this year, and promised reforms to boost exports and employment.
But investors fear the momentum of reforms will slow as the government gears up for another national vote, potentially as soon as this year, on constitutional change to introduce the presidential system sought by President Tayyip Erdogan.
The OECD said Turkey’s economy, which grew a higher-than-expected 4.8% year-on-year in the first quarter, had remained resilient under adverse conditions, and that stronger growth was within reach if reforms were delivered. It also called for a strengthening of the rule of law, judicial independence and the fight against corruption to improve the investment climate.
Deputy Prime Minister Mehmet Simsek said yesterday that upgrading Turkey’s customs union with the European Union to include agriculture and services was an important target that could nearly double trade with the bloc from $158bn to $300bn a year.
Simsek was speaking at a joint news conference with the OECD’s secretary-general in the southern city of Gaziantep.
The OECD, which last issued a survey on Turkey two years ago, said trade agreements to abolish tariffs on manufactured goods should be widened to include services, investment, competition, intellectual property and public procurement.
It also said Turkey should continue to contain consumer credit and promote private pensions to try to boost domestic saving.
It urged the central bank to tighten monetary policy unless inflation declined faster than projected, and to simplify its policy framework to boost its credibility. The bank has repeatedly cut interest rates in line with Erdogan’s calls for cheaper credit, even though inflation remains above target, although it has vowed to improve the transparency of its policy.