Export-Led Growth: 1980- Onwards

1980 1983 1989 2011

Outward Orientation Financial Liberalization

Economy at 1970’s:▫ High inflation

1957-58: 20-25% 1970’s : 75-80 %

▫ Unsustainable trade deficits 1950’s: 300-400 million US$ 1970’s: 2500 million US$

▫ High unemployment rates 1972: 13,3% 1983: 16%

Economy at 1970’s:

▫External factors: Increases in oil prices (OPEC) Economic crises in trade partners The collapse of the Bretton-Woods system

▫Cyprus operation

▫New trends in the world: USAReaganomics UK Thatcherism

Economy at 1970’s:

•Government Policies:

▫Industrialization: Consumption goods Etatism period Durable consumption goodsPlanned

economy Intermediate goods Investment goods

▫Stabilization efforts

Structural Adjustment Program:January 24, 1980

▫Prepared by Turgut Özal (Undersecretary of the Prime Minister) under the control of IMF.

▫Prime Ministers: 1980-83: Bülent Ulusu (Military Rule) 1983-87: Turgut Özal (Anavatan Party) 1987-89: Turgut Özal (Anavatan Party)

Structural Adjustment Program:January 24, 1980

• General Principles:

▫Long-term economy policy To end economic crisis in the short-run Structural change in the long-run

▫Free Market Economy Price Mechanism Decresing role of government

▫Export-led Growth

Structural Adjustment Program: Policies

•1. Pricing▫Goods and services market▫Labor market▫Money market▫Foreign exchange market

1968-1972: 1st vicious circle

low savings

low investments

low income

1968-1972: 2nd vicious circle

limited domestic

production

low exports

low imports

Structural Adjustment Program: Policies

•2. Outward Orientation▫Export promotion

Exchange rate policy Export tax rebate system Cash premiums Export credits

▫Import liberalization

Structural Adjustment Program: Policies

•3. Foreign Investment Expectation

•4. Public Sector Reform▫To broaden the tax base▫Rationalization of public investments▫To improve the functioning of the PEEs▫Privatization

Main Economic Indicators (%)

GNP Growth Employment Growth

Savings/GNP Manufac./GDP

Agriculture/GDP

1980 -1.1 1.2 16.0 21.1 22.6

1983 3.3 0.9 16.2 23.9 19.6

1985 5.1 1.6 18.9 25.1 18.8

1989 1.9 2.1 23.6 25.3 16.7

Main Economic Indicators (%)

Exports/GNP Imports/GNP Current acc. /GNP

Foreign debt/GNP

1980 6.4 13.9 -5.5 28.0

1983 15.7 19.6 -3.7 35.7

1985 20.7 23.5 -1.9 47.5

1989 23.5 24.0 0.9 52.0

Main Economic Indicators (%)

Inflation rate Monetary growth (M1)

Nominal Depreciation R.

1980 103.8 57.9 142.0

1983 28.0 48.0 40.2

1985 43.9 39.7 40.9

1989 66.9 72.9 47.4

Yeldan, 2001, s.52.

Growth Rates: 1923-2010Period Average Growth Rate

(%)

1924-1929 8,6

1930-1939 5,8

1940-1945 -6,0

1946-1953 10,2

1954-1961 4,4

1962-1979 6,5

1980-1988 4,9

1989-2002 3,3

2003-2010 4,9