It’s hard not to be bullish on Turkey given its favorable demographic pyramid, manufacturing prowess and strategic location vis a vis the world’s proven gas and oil reserves–all against the backdrop of projections that over the next seven years its growth will match or exceed that of any other big country except China and India.  That said, as Barclays Capital notes “the comparison with Asian economic performance does not go much beyond recent headline growth” considering the country’s low savings rate and rapidly widening current account deficit.  The most recent data, in fact, points to “export growth slowing with imports continuing to boom”, which The Economist noted last month is “worrying because it suggests that competitiveness is steadily eroding.”  The solution?  In part, increase domestic savings while moving [exports] up-market and continuing to diversify trade away from the EU and towards MENA.  Per the latter issue, “in 1990 only 15% of Turkey’s exports were in medium-or high-tech sectors, according to Fatma Melek, chief economist at Akbank.  Today, the figure is almost 40%. Yet Turkey spends only 0.7% of its GDP on research and development, compared with an OECD average of 2.3%. And with almost a quarter of the workforce in agriculture, overall productivity remains low.”

Advertisements