While AKP-led government has achieved economic growth and stability, the party has not outperformed past governments or the developing world in terms of key indicators

Key Messages

1. AKP-led government has achieved economic growth and stability

2.

3.

AKP-led government has not outperformed past Turkish governments in terms of key indicators

AKP-led government has performed on-par with the developing world in terms of key indicators, however has not outperformed it. Stable economic growth can be observed across the world - especially at developing countries - since 2002

Turkish economy’s external debt has increased from USD 130bn in 2002 to USD

307bn in 2011 under AKP governance – even though IMF debt has decreased

4.

GDP and GDP per capita have consistently increased between 2002-2011 – under AKP governance

Progression of Turkish Economy Main Indicators

Source: World Bank

GDP, constant 2000 USD exchange rate [USD bn]1)

5.25%

2011

422.8

2010

389.7

2009

357.0

2008

375.1

2007

372.6

2006

356.0

2005

333.0

2004

307.2

2003

280.9

2002

266.9

GDP per capita, constant 2000 USD exchange rate [USD bn]1)

4,078

3.87%

2011

5,741

2010

5,356

2009

4,969

2008

5,288

2007

5,324

2006

5,155

2005

4,887

2004

4,569

2003

4,235

2002

1 – ECONOMIC GROWTH AND STABILITY

1) AKP won the elections at the end of 2002 and have been leading the government since

Foreign Direct Investment has increased and inflation has stabilized at single-digit figures under AKP governance

Progression of Turkish Economy Main Indicators

Source: World Bank

Foreign Direct Investment inflow, current USD [USD bn] 1)

34.94%

2011

16.0

2010

9.0

2009

8.4

2008

19.5

2007

22.0

2006

20.2

2005

10.0

2004

2.8

2003

1.7

2002

1.1

Inflation, consumer prices [annual %] 1)

1 – ECONOMIC GROWTH AND STABILITY

2011

6.5

2010

8.6

2009

6.3

2008

10.4

2007

8.8

2006

10.5

2005

10.1

2004

10.6

2003

25.3

2002

45.0

1) AKP won the elections at the end of 2002 and have been leading the government since

• Inflation had reduced from 106% in 1994 to 45% in

2002 – there was a downward trend in inflation prior

to AKP governance. There was also a global trend

towards a stabilization of inflation across emerging

countries in the 2000s

• Turkish economy grew at 5.25% per annum

between 2002-2011, growth was at 4.6% p.a.

between 1960-2000

While AKP has achieved economic growth and stability, the party took advantage of favorable global trends and a recovered economy following the 2001 crisis

Key Facts and Implications for AKP-led Government

Source: World Bank

• Turkish economy was the 22nd biggest economy

in 1981, 21st in 1991, 17th in 2002 and again 17th

in 2011

• While past governments have been

successful in increasing Turkey’s GDP size

ranking from 22nd to 17th, under AKP’s

governance, ranking has stayed the same

KEY FACTS IMPLICATIONS FOR AKP-LED GOVERNMENT

A

B

C

2 – BENCHMARKING WITH PAST TURKISH GOVERNMENTS

• The plan to stabilize inflation was developed

under Kemal Dervis’ leadership and AKP

found a recovered economy «in their lap» at

the beginning of their term. A global trend

towards stabilized inflation also helped AKP

• Current government has achieved higher

growth rate compared to previous times.

However, while previous governments since

1960 have performed better than the

developing world in terms of growth, AKP

has not been able to do so

While past Turkish governments have been successful in increasing the ranking of Turkey in terms of GDP, AKP-led government has not been able to do so

Ranking of countries in order of GDP (based on constant 2000 USD exchange rate)

Source: World Bank

2A – BENCHMARKING WITH PAST TURKISH GOVERNMENTS

1981 1991 2002 2011

1. United States

2. Japan

3. Germany

4. France

5. United Kingdom

……..

16. India

17. Sweden

21. Austria

22. Turkey

……..

1. United States

2. Japan

3. Germany

4. United Kingdom

5. France

……..

16. India

17. Switzerland

21. Turkey

……..

1. United States

2. Japan

3. Germany

4. United Kingdom

5. China

……..

16. Russia

17. Turkey

1. United States

2. Japan

3. China

4. Germany

5. United Kingdom

……..

16. Russia

17. Turkey

While AKP-led government achieved higher growth, the same trend is seen across the developing world – AKP-led government might have taken advantage of a global trend

Source: World Bank

2B – BENCHMARKING WITH PAST TURKISH GOVERNMENTS

Annual GDP growth across various timeperiods in Turkey and the Developing World [%]

1) Developing world includes emerging countries in East Africa & Pacific, Europe & Central Asia, Latin America & Caribbean, Middle East & Africa, South Asia, Sub-Saharan

Africa – as per World Bank categorization

Comments

• While Turkish economic growth has outperformed the developing world in all periods until 2002, it has stayed below developing world growth

under AKP governance

• While the world economy has grown at 2.69% per annum between 2002-2011, developing world has grown at a much higher rate – 6.61%.

This is due to a trend towards increased productivity, consumption, foreign direct investment in the developing world in the 2000s – which is

fueled by globalization. As the room for consumption surge has reached close to saturation in the developed world, developed countries,

such as US and Europe, have focused their attention towards the developing countries

• Globalization and growth in the developing world partially explain the higher growth rate of Turkish economy (compared to past

governments) nder AKP governance

Annual GDP growth across various timeperiods in Turkey and the Developing World

2) 1960-2000 1970-2000 1981-2000

4.6 3.7

4.3 3.6

4.4 3.3

1991-2000 1960-2011 2002-2011

4.0 4.5 5.3

3.9 4.2

6.6

Turkey Developing World

AKP Governance

1)

1)

While AKP reduced inflation to a single digit, inflation had been in a downward trend prior to AKP and inflation stabilization occurred across many countries globally

Source: World Bank

2C – BENCHMARKING WITH PAST TURKISH GOVERNMENTS

Turkey Inflation, consumer prices [annual %]

54.4

2000

54.9

1999

64.9

1998

84.6

1997

85.7

1995

80.3

1996

88.1

1994

106.3

2001 2002

45.0

6.5

2011

Beginning of AKP Governance

Inflation Rate at Other Countries [annual %]

• Turkey’s inflation rate has decreased from 106% in 1994

to 45% in 2002 due to various fiscal and monetary

policies. The decrease in inflation rate has continued

during AKP leadership and inflation has been maintained

at single digit figures

• Many countries around the world had inflation rates

above 10% in 1994 – around 70 countries. The number

of countries with inflation rates above 10% decreased to

around 20 in 2011. There has been a global effort

towards decreasing inflation rates and maintaining

economic stability during 2000s

Analysis of Turkish Inflation Rate prior to AKP and Globally

1994 2011

Brazil 2076% 6.6%

Bulgaria 96% 4.2%

Uruguay 45% 8.1%

Romania 137% 5.8%

Algeria 29% 4.5%

Comments

Turkish economy has been the 4th fastest growing economy among the 10 countries selected – growth is lower than developing world average GDP growth

Source: World Bank

3 – GLOBAL BENCHMARKING

GDP Annual Growth at comparable countries, 2002-2011 [%]

3.9

Thailand

4.0

Russia

4.7

Egypt

4.9

Turkey

5.3

India

5.6

Indonesia

8.1

China

10.7

World Developing

World

Brazil South

Africa

3.5 2.4

Mexico

2.7

6.6

3,548 GDP, 2011 [USD bn]

1,047 293 423 163 434 188 945 194 722

Comments

• Asian economies (China, India, Indonesia) have performed better than the Turkish economy in terms of GDP growth. While Turkey’s growth,

between 2002-2011, is above the world GDP growth (as expected), it has not outperformed the developing world GDP growth

• Chinese and Indian economies make up a vast amount of the developing world GDP. Their high GDP growth rates have an impact on the

developing world average GDP growth

Turkey GDP Growth Benchmarking

2)

2) AKP won the elections at the end of 2002 and have been leading the government since

42,568 11,207

1)

1) Methodology to select comparable countries for benchmarking are explained in section 2 of the report

Turkish GDP per capita growth between 2002-2011 ranks 5th among the 10 countries selected

Source: World Bank

3 – GLOBAL BENCHMARKING

GDP Per Capita Growth, based on constant 2000 USD exchange rate, 2002-2011 [%]

2.8

Egypt

3.1

Thailand

3.1

Turkey

3.9

Indonesia

4.5

India

4.9

Russia

6.6

China

10.2

Brazil South

Africa

2.3

1.1

Mexico

1106 /

2640

GDP per Capita, (2002/2011) [USD]

Comments

• Turkey’s GDP per capita increased by 3.9% per annum between 2002 and 2011. It is on par with other developing countries. BRIC (Brazil-

Russia-India-China) have generally performed higher than Turkey while Turkey has perfrormed better than South Africa, Mexico and Thailand

• Turkey GDP per capita was the 2nd highest prior to AKP, in 2002, and was still the 2nd highest in 2011

Turkey GDP per Capita Annual Growth Benchmarking

1)

1) AKP won the elections at the end of 2002 and have been leading the government since

475 /

843

1968 /

3033

816 /

1207

4078 /

5741

2043 /

2699

1508 /

1977

3740 /

4803

3108 /

3825

5703 /

6288

While IMF credit has decreased since 2002 by USD 18bn, total external debt increased by USD 177bn – external debt stock includes debt from IMF

Source: World Bank, Desktop Research

4 – DEBT ANALYSIS

10.06%

2011

307

200

107

2010

300

191

109

2009

278

172

106

2008

290

189

101

2007

258

161

97

2006

209

121

88

2005

171

85

86

2004

158

64

94

2003

143

49

94

2002

130

43

86

2011

4.5

2010

7.3

2009

9.6

2008

8.7

2007

7.3

2006

10.9

2005

14.8

2004

21.7

2003

24.3

2002

22.2

External Debt Stock, Current USD Exchange Rate [USD bn]

IMF Credit, Current USD Exchange Rate [USD bn]

Comments

• Kemal Dervis was brought to steer the

economy in his capacity as the deputy

prime minister when the 2001 economic

crisis erupted. The IMF opened the

credit taps to overcome the crisis.

Following the formulation of a sound

roadmap for economic recovery, AKP

won the elections in Nov. 3, 2002. The

party found a recovered economy in its

lap

• Turkey’s debt to the IMF is a very small

portion of the total debt. While the AKP-

led government has been successful in

decreasing the amount of debt owed to

IMF, unfortunately, this is not

representative of the trend seen in total

external debt

• Turkey’s external debt increased by

USD 177bn since 2002. Both public and

private debt have contributed to this

increase. Government was able to pay

portion of the IMF debt through the

income from privatizations

Turkey’s External Debt Stock and IMF Credit Progression

Private debt Public debt

World Economic Forum (WEF) Global Competitiveness Report has categorized countries into 5 groups – these groups represent various stages of development of a country (1/2)

Source: World Economic Forum, World Bank

Stages of Development Description

Sample List of

countries

Stage 1: Factor Driven Economies in the first stage are mainly factor-driven

and compete based on their factor endowments –

primarily low-skilled labor and natural resources.

Companies compete on the basis of price and sell

basic products or commodities, with their low

productivity reflected in low wages.

India, Kenya, Pakistan,

Ghana, Moldova,

Tajikistan, Vietnam…

Transition from Stage 1 to

Stage 2

Economies in transition from Stage 1 to Stage 2 Egypt, Saudi Arabia, Iran,

Philippines, Venezuela…

Stage 2: Efficiency Driven As a country becomes more competitive, productivity

will increase and wages will rise with advancing

development. Countries will then move into the

efficiency-driven stage of development, when they

must begin to develop more efficient production

processes and increase product quality because

wages have risen and they cannot increase prices

China, Indonesia, South

Africa, Thailand,

Colombia, Peru, Romania,

Ukraine…

Stages of Development

World Economic Forum (WEF) Global Competitiveness Report has categorized countries into 5 groups – these groups represent various stages of development of a country (2/2)

Source: World Economic Forum, World Bank

Stages of Development Description

Sample List of

countries

Transition from Stage 2 to

Stage 3

Economies in transition from Stage 2 to Stage 3 Brazil, Mexico, Russia,

Turkey, Argentina, Poland,

Chile, Malaysia

Stage 3: Innovation Driven Finally, as countries move into the innovation-driven

stage, wages will have risen by so much that they are

able to sustain those higher wages and the

associated standard of living only if their businesses

are able to compete with new and/or unique

products, services, models, and processes

United States, Japan,

France, United Kingdom,

Israel, Germany…

Stages of Development

The first four groups contain all of the developing countries – countries from each group have been selected for this benchmarking - based on size of economy in 2011

Source: World Economic Forum, World Bank

Stage 1 Stage 1 to 2 Stage 2 Stage 2 to 3

1. Brazil

2. Mexico

3. Russia

4. Turkey

5. Argentina

6. Poland

1. China

2. Indonesia

3. South Africa

4. Thailand

5. Colombia

6. Peru

2. Egypt

1. Saudi Arabia1)

3. Iran

4. Venezuela

5. Philippines

6. Algeria

1. India

2. Pakistan

3. Bangladesh

4. Nigeria

5. Vietnam

6. Kenya

Countries within each stage of development (category) has been ranked in terms of GDP. As «Stage 2»

countries are similar to «Stage 2 and 3», 4 countries from each category have been selected for benchmarking

purposes. One country each from «Stage 1» and «Stage 1 to 2» categories have been selected for

benchmarking

1) Saudi Arabia is a unique country in terms of governance and economy, therefore has not been included in the list of comparable countries

Comparable Country Selection