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. 2. 3.

AKP-led government has achieved economic growth and stability

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 economys external debt has increased from USD 130bn in 2002 to USD 307bn in 2011 under AKP governance even though IMF debt has decreased

4.

1 ECONOMIC GROWTH AND STABILITY

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

Progression of Turkish Economy Main Indicators

GDP, constant 2000 USD exchange rate [USD bn]1)
5.25%

266.9

280.9

307.2

333.0

356.0

372.6

375.1

357.0

389.7

422.8

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

GDP per capita, constant 2000 USD exchange rate [USD bn]1)
3.87% 4,078 4,235 4,569 4,887 5,155 5,324 5,288 4,969 5,356 5,741

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

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

1 ECONOMIC GROWTH AND STABILITY

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

Progression of Turkish Economy Main Indicators

Foreign Direct Investment inflow, current USD [USD bn] 1)
34.94% 20.2 10.0 1.1 2002 22.0 19.5 8.4 9.0 16.0

1.7
2003

2.8 2004 2005 2006 2007 2008 2009 2010 2011

Inflation, consumer prices [annual %] 1)

45.0 25.3 10.6 10.1 2005 10.5 8.8 2007 10.4 6.3 2009 8.6 2010 6.5 2011

2002

2003

2004

2006

2008

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

2 BENCHMARKING WITH PAST TURKISH GOVERNMENTS

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

KEY FACTS IMPLICATIONS FOR AKP-LED GOVERNMENT While past governments have been successful in increasing Turkeys GDP size ranking from 22nd to 17th, under AKPs governance, ranking has stayed the same 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 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

A Turkish economy was the 22nd biggest economy in 1981, 21st in 1991, 17th in 2002 and again 17th in 2011
B Turkish economy grew at 5.25% per annum between 2002-2011, growth was at 4.6% p.a. between 1960-2000

C 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
Source: World Bank

2A BENCHMARKING WITH PAST TURKISH GOVERNMENTS

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)
1981
1. United States 2. Japan 3. Germany

1991
1. United States 2. Japan 3. Germany

2002
1. United States 2. Japan 3. Germany

2011
1. United States 2. Japan 3. China

4. France 5. United Kingdom

..

4. United Kingdom 5. France

..

4. United Kingdom 5. China

..

4. Germany 5. United Kingdom

..

16. India
17. Sweden .. 21. Austria 22. Turkey
Source: World Bank

16. India
17. Switzerland .. 21. Turkey

16. Russia
17. Turkey

16. Russia
17. Turkey

2B BENCHMARKING WITH PAST TURKISH GOVERNMENTS

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

Annual GDP growth across various timeperiods in Turkey and the Developing World
Annual GDP growth across various timeperiods in Turkey and the Developing World [%]
AKP Governance
1)

6.6 4.6 3.7

4.3

3.6

4.4

3.3

4.0

3.9

4.5

4.2

5.3

2)

1960-2000 Turkey

1970-2000 Developing World

1)

1981-2000

1991-2000

1960-2011

2002-2011

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
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 Source: World Bank

2C BENCHMARKING WITH PAST TURKISH GOVERNMENTS

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

Analysis of Turkish Inflation Rate prior to AKP and Globally

Turkey Inflation, consumer prices [annual %]
106.3
Beginning of AKP Governance

88.1

80.3

85.7

84.6

64.9

54.9

54.4

45.0 6.5

1994

1995

1996

1997

1998

1999

2000

2001

2002

2011

Inflation Rate at Other Countries [annual %]

Comments
Turkeys 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

1994
Brazil Bulgaria Poland Romania Russia
Source: World Bank

2011
6.6% 4.2% 4.2% 5.8% 8.4%

2076% 96% 33% 137% 308%

3 GLOBAL BENCHMARKING

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

Turkey GDP Growth Benchmarking

GDP Annual Growth at comparable countries, 2002-2011 [%]
GDP, 2011 [USD bn] 3,548 1,047 293 423 163 434 188 945 194 722 42,568 11,207

1)

2)

10.7 8.1 5.6 6.6 5.3 4.9 4.7 4.0 3.9 3.5 2.4 2.7

China

India

Indonesia Turkey

Egypt

Russia

Thailand

Brazil

South Africa

Mexico

World Developing World

Comments
Asian economies (China, India, Indonesia) have performed better than the Turkish economy in terms of GDP growth. While Turkeys 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
1) Methodology to select comparable countries for benchmarking are explained in section 2 of the report 2) AKP won the elections at the end of 2002 and have been leading the government since Source: World Bank

3 GLOBAL BENCHMARKING

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

Turkey GDP per Capita Annual Growth Benchmarking

GDP Per Capita Growth, based on constant 2000 USD exchange rate, 2002-2011 [%]
GDP per Capita, (2002/2011) [USD] 1106 / 2640 475 / 843 1968 / 3033 816 / 1207 4078 / 5741 2043 / 2699 1508 / 1977 3740 / 4803 3108 / 3825 5703 / 6288

1)

10.2 6.6 4.9 4.5 3.9 3.1 3.1

2.8

2.3 1.1

China

India

Russia

Indonesia

Turkey

Thailand

Egypt

Brazil

South Africa

Mexico

Comments
Turkeys GDP per capita increased by 3.9% per annum between 2002 and 2011. It is on par with other developing countries. BRIC (BrazilRussia-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
1) AKP won the elections at the end of 2002 and have been leading the government since Source: World Bank

4 DEBT ANALYSIS

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

Turkeys External Debt Stock and IMF Credit Progression

External Debt Stock, 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 Turkeys debt to the IMF is a very small portion of the total debt. While the AKPled 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 Turkeys 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

10.06% 258 130 86 43 143 94 49 158 94 64 171 86 85 209 88 121 97 290 101 189 2008 278 106 172 2009 300 109 191 2010 307 107 200

161
2007

2002 2003 2004 2005 2006 Public debt Private debt

2011

IMF Credit, Current USD Exchange Rate [USD bn]

22.2 24.3 21.7 14.8 10.9 7.3 2007 8.7 9.6 7.3 2010 4.5 2011

2002

2003

2004

2005

2006

2008

2009

Source: World Bank, Desktop Research

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)

Stages of Development
Stages of Development Description
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. Economies in transition from Stage 1 to Stage 2

Sample List of countries

India, Kenya, Pakistan, Ghana, Moldova, Tajikistan, Vietnam

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

Source: World Economic Forum, World Bank

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)

Stages of Development
Stages of Development Description
Transition from Stage 2 to Stage 3 Economies in transition from Stage 2 to Stage 3

Sample List of countries

Brazil, Mexico, Russia, Turkey, Argentina, Poland, Chile, Malaysia United States, Japan, France, United Kingdom, Israel, Germany

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

Source: World Economic Forum, World Bank

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

Comparable Country Selection

Stage 1
1. India 2. Pakistan 3. Bangladesh 4. Nigeria 5. Vietnam 6. Kenya

Stage 1 to 2
1. Saudi Arabia1) 2. Egypt 3. Iran 4. Venezuela 5. Philippines 6. Algeria

Stage 2
1. China 2. Indonesia 3. South Africa 4. Thailand 5. Colombia 6. Peru

Stage 2 to 3
1. Brazil 2. Mexico 3. Russia 4. Turkey 5. Argentina 6. Poland

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 Source: World Economic Forum, World Bank