30 Nisan 2013 Salı

Turkey might prove to be a “turkey” after all!

I’ve been looking into some national income statistics for a while, and was intrigued to find out that Turkey is rapidly deindustrializing for the past 15 years. (Actually, to be honest, I wasn’t that much intrigued because I was actually expecting that. Anyone witnessing the decline in real investments coupled with high CA deficits and very low FDI flows into Turkey would have come up with that result.  But, the actual rate of deindustrialization still came as a surprise.)

As seen from the graph, Turkish share of manufacturing output has declined from a level of 24% in 1998 to less than 16% as of end of last year. This graph is drawn using the new GDP data series with a base year of 1998.

If we extend the data back to 1968, we see a clear trend of initially rising and subsequently levelling share of manufacturing in most EMs. Turkey and Mexico’s manufacturing shares actually drop, while Thailand’s keeps on rising.
 Actually, many people may argue that a similar trend can be seen in almost all developing countries when they switch from an agrarian to an industrial society. However, the problem with Turkey is its period of high(er) industrial output is extremely brief compared to countries like Japan and Korea which have advanced to premiere league in the last 50 years.

Let me requalify the title: Turkey might prove to be a turkey unless it radically changes its industrial policy and significantly increases its investment spending.

NB: A caveat is in order while using GDP data. “Real” (inflation-adjusted) series are good for only measuring the inter-period growth rate of GDP and its components. In order to see how the actual shares of components of GDP behave in time, the “current price” series must be used.