Services Sector Index
In the early 1980's Turkey launched a radical stabilization and structural reform programme. The programme was designed to liberalize and outward-orient the Turkish economy which had relied on "import-substitution" development strategies for decades. The measures taken included lowering border protection unilaterally; encouragement of exports and foreign investment; abolition of rigid foreign exchange controls; deregulation of financial markets; introduction of the value-added tax; initiation of plans to down-size the public sector and to strengthen and/or privatise State Economic Entreprises (SEE's).
The 1980 structural reform programme was successful in liberalizing the economy but not at establishing macroeconomic balances. After 1988, the imbalances became pronounced, with chronic budget deficits triggering high inflation rates averaging 50 to 70 per cent per year.
Early nineties witnessed high rates of growth coupled with high price rises. In 1993, GDP increased by 7.5 % while imports increased by 36 %. In January 1994 two rating agencies downgraded Turkey's credit rating. The resulting exchange market crisis caused the Turkish Lira to drop by 70 % against the dollar within a couple of months.
The government launched a drastic IMF-backed stabilisation programme on April 1994 which was succesful in restoring market stability and cutting the public sector borrowing requirements but resulted in a decrease in GNP by 6.1 % in 1994. However by 1995, high growth and inflation picked up and remained high throughout 1995 and 1996. While persisting public deficit is the main source of inflation, lack of competition (due to very high industry concentration in both the public & private sectors) is another factor limiting efforts to control inflation.
Turkey's limited tax capacity (the lowest among OECD countries) makes it difficult to finance government expenditure. To finance the gap between revenue and expenditure, governments have relied heavily on domestic debt. Several plans aimed at reducing public borrowing requirement have been announced by governments but have not been implemented. As of end of 1996, this figure still remains high at 9.6 % of GNP.
(*) Provisional figure, covering first six months.
|Selected Economic Indicators||1994||1995||1996
|GNP at current producer prices (TL trn)||3,888||7,854||15,125
|Real GNP Growth at 1987 prices (%)||-6.1||8.0||7.9
|Av. Consumer Price Inflation (%)||106.3||93.6||83.2
|Exports ($ bn)||18.1||21.6||10.9(*)
|Imports ($ bn)||23.3||35.7||20.1(*)
|Public Sector borrowing (% of GNP)||8.2||5.4||9.6
Sources: State Institute of Statistics, State Planning Organization
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SERVICES SECTOR INDEX :