Responding To the Changing Shape of the World Economy: Consumer-Spending and Export Developments in Turkey in a Comparative Perspective

Abstract

This paper addresses the sustainability of Turkey’s current-account position by emphasizing household consumption and exports. It highlights Turkey’s comparatively high consumption expenditure as a share of GDP, much of which credit financed over the past few years, and the significant increase in the contribution of developing countries, including Turkey, to global economic growth, but shows that these features have been accompanied by the accumulation of large global current-account imbalances. The paper employs GTAP-simulations to analyse the frequently made recommendation that slower consumer demand growth and a durable improvement in the price competitiveness of exports are the key to improving the sustainability of Turkey’s external accounts. It argues that demand growth on Turkey’s traditional export markets, especially the Euro area, is likely to remain subdued for a protracted period of time and cannot be expected to generate expansionary impulses for other countries’ exports. The paper concludes that diversifying the destination markets of Turkey’s exports towards rapidly growing developing countries will require product innovation with a view to meeting these * Earlier versions of parts of this paper wereinputs to UNCTAD‟s Trade and Development Reports 2010 and 2013. The author thanks Lyubov Chumakova for help with the data and Juan Pizarro for undertaking the GTAP-simulations. The opinions expressed are solely those of the author and do not necessarily reflect the views of UNCTAD or its Member States. ** UNCTAD.