Maldives Development Update, October 2024: Seeking Stability in Turbulent Times, 2024
This work is a product of the staff of The World Bank with external contributions. The findings, ... more This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy, completeness, or currency of the data included in this work and does not assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the use of or failure to use the information, methods, processes, or conclusions set forth. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be construed or considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved.
Maldives Development Update, May 2024 - Scaling Back & Rebuilding Buffers, 2024
This work is a product of the staff of The World Bank with external contributions. The findings, ... more This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy, completeness, or currency of the data included in this work and does not assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the use of or failure to use the information, methods, processes, or conclusions set forth. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be construed or considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved.
Maldives Development Update, October 2023: Batten Down the Hatches, 2023
This work is a product of the staff of The World Bank with external contributions. The findings, ... more This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy, completeness, or currency of the data included in this work and does not assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the use of or failure to use the information, methods, processes, or conclusions set forth. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be construed or considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved.
Maldives Development Update, April 2023: Navigating a Tight Line, 2023
This work is a product of the staff of The World Bank with external contributions. The findings, ... more This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy, completeness, or currency of the data included in this work and does not assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the use of or failure to use the information, methods, processes, or conclusions set forth. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be construed or considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved.
Maldives Development Update, October 2022: Towards Resilient and Affordable Housing, 2022
Driven by a rebound in tourism, Maldives’ economy continued to recover strongly in 2022, and
pove... more Driven by a rebound in tourism, Maldives’ economy continued to recover strongly in 2022, and poverty is expected to return to pre-pandemic levels by end-2022.
Leveraging Global Value Chains for growth in Turkey : A Turkey Country Economic Memorandum, 2022
Turkey saw phenomenal growth in the 2000s as economic reforms ushered in FDI, GVCs expanded, and ... more Turkey saw phenomenal growth in the 2000s as economic reforms ushered in FDI, GVCs expanded, and productivity increased. The early 2000s saw Turkey exit from major economic crisis with a strengthened fiscal framework, a strengthened, inflation-targeting mandate for the Central Bank, the establishment of an independent bank regulator, and importantly, a recently agreed Customs Union agreement with the EU. From 2001 to 2017, incomes per capita in Turkey doubled in real terms and tripled in current dollar terms. Turkey transformed from a lower-middle-income country (LMIC) at the start of the 2000s to very nearly reaching high-income status by 2014. This drove a rapid fall in poverty from above 30 percent to just 9 percent. Very few other countries matched Turkey’s growth over this period, and almost all of them were new EU member states.
Turkish housing valuations appear to be stretched benchmarked against a variety of standard metri... more Turkish housing valuations appear to be stretched benchmarked against a variety of standard metrics. However, macroeconomic spillovers from housing market risks may be contained, as the household sector still has buffers to cushion against possible price corrections. House prices show a strong relationship with financial and labor market conditions, as well as mortgage debt affordability. Housing developers, however, are highly leveraged with significant FX exposures, and relatively high NPL ratios.
Non-financial corporate sector (NFC) debt has increased substantially in recent years, on the bac... more Non-financial corporate sector (NFC) debt has increased substantially in recent years, on the back of increased foreign currency (FX) leverage. This has translated into a large and widening net open FX position. Partially mitigating these developments, the maturity of FX debt has lengthened, thereby alleviating firms’ short term refinancing, and interest rate risks. Indeed, the corporate sector has been resilient through a period of marked exchange rate depreciation as well. However, a sizable portion of NFC FX debt is held by more vulnerable sectors with less favorable natural hedging and debt service capacity. These vulnerabilities have, on balance, become larger, and could become a source of brittleness when economic and financing conditions turn less supportive. Over the short term, concentration of NFC FX leverage in a few non-tradable industries may also pose risks for the domestic banking sector. The growing disconnection between higher NFC borrowing and private investment in recent years may also have implications for the country’s medium term growth potential.
After a long term of experiencing imbalances in the economy mainly due to the
deterioration in d... more After a long term of experiencing imbalances in the economy mainly due to the
deterioration in debt, Turkey managed to solve its structural macroeconomic problems with
the support of strong reforms, political stability and regulatory improvements regarding the
financial system after 2002. This dissertation aims to illustrate the 2003 fiscal consolidation
programme in Turkey by using Miller and Zhang’s basic dynamic fiscal consolidation model.
The basic model is used to simulate the convergence path of debt to the target for high/low
inflation and changing real interest rate scenarios. The impacts of high inflation on fiscal
consolidation have been underlined. Then, banking system regulations, macro structural
reforms and the role of Bretton Woods institutions are discussed. Furthermore, under the
light of Turkish experiences, policy recommendations are provided for the other nations that
are suffering from very high debt levels.
The Maldives Country Climate and Development Report (CCDR) analyses climate change and developmen... more The Maldives Country Climate and Development Report (CCDR) analyses climate change and development challenges and opportunities in the country in an integrated manner.
The report focuses on the Maldives achieving six high-level objectives: (1) improving macroeconomic stability and fiscal space to enable climate action, (2) mobilizing climate finance, (3) enhancing the climate resilience of islands and infrastructure, (4) enhancing the climate resilience of ecosystems, (5) enhancing the climate resilience of livelihoods (fishers and tourism), and (6) unlocking the development benefits from green transitions in energy, mobility, and waste sectors.
The CCDR contributes original research into key dimensions of climate resilience in the Maldives, including sea-level rise impact modeling on land, infrastructure, and economic activities; ocean heating impact modeling on fishing and coral reef degradation; and survey work to understand climate change adaptation efforts of and associated challenges faced by tourist resorts.
The recommendations presented in the CCDR will support the country in facilitating its climate resilience and green transitions, giving due consideration to the macroeconomic vulnerabilities at the time of releasing the report.
Türkiye Public Finance Review: Leveraging Fiscal Resources for Stability and Resilience, 2023
Reforms since the early 2000s have helped transition Türkiye’s fiscal policies and institutions f... more Reforms since the early 2000s have helped transition Türkiye’s fiscal policies and institutions from obstacle to enabler of development. At the end of the nineties, fiscal policy was hostage to the large inefficiencies of an SOE dominated public sector. The drain on the budget was financed by the central bank and short-term external credit. External debt levels were unsustainable and interest obligations crowded out development expenses. These fueled macroeconomic instabilities and were a drag on sustainable growth. Fast forward ten years to 2010. A robust macro-fiscal framework was providing a stable platform relieved from the pressures of high debt. This helped accelerate revenue collection, whilst enabling a reprioritization of spending towards development priorities. Fiscal buffers helped Türkiye recover quickly from the Global Financial Crisis and provided cushion for further shocks in the 2010s.
Turkey Economic Monitor, February 2022 - Sailing Against the Tide, 2022
Turkey’s economic performance has been a tale of two economies, overall high growth, matched by a... more Turkey’s economic performance has been a tale of two economies, overall high growth, matched by a deterioration in macro-financial conditions. Good progress in vaccination rollouts allowed Turkey to reopen gradually in 2021 despite a continued rise in Coronavirus (COVID-19) cases. Real economic activity remained strong, driven by strong broad-based export growth and domestic demand. Exports of goods reached record high levels in 2021 supported by buoyant external demand, improved price competitiveness and demand shifts to Turkey due to rising shipping costs. Turkey’s GDP grew by 22 percent year-on-year in 2021Q2–the second highest among G-20 countries–and 7.4 percent in 2021Q3. Strong goods and services export performance helped current account deficit to narrow significantly. Robust economic activity led to strong revenue growth and supported fiscal balances. The labor market saw a good recovery in 2021 and employment levels surpassed pre-pandemic levels, supported by buoyant economic activity. The regional inequalities of the COVID-19 shock manifested in larger impacts for women from Eastern regions, widening pre-existing gender gaps. The authorities began to cut interest rates in September, by 500 basis points by the end of 2021, despite rising inflation and inflation expectations. This has exacerbated macro-financial conditions and impacted investor confidence - causing financial market turbulence, large deprecation of the Lira, higher inflation, and increased dollarization. The Lira has been the most depreciating currency among emerging market economies this year. The large depreciation of the Lira coupled with rising international prices caused inflation to increase to its highest rate since the August 2018 shock.
Turkey Economic Monitor, December 2018 - Steadying the Ship, 2018
Mid-2018 was a period of intense market volatility and rising economic stress in Turkey that was ... more Mid-2018 was a period of intense market volatility and rising economic stress in Turkey that was precipitated by existing macroeconomic imbalances and elevated political tensions with the United Staes. A confluence of burgeoning domestic economic imbalances and a more challenging external environmentled to a dent in investor confidence in Turkish assets and a sharp slowdown in capital flows to Turkey in 2018 Q2-Q3. Though this did not technically amount to a sudden stop, Turkey was particularly badly affected by a general move away from emerging markets (EMDE) due to its accumulated macro imbalances (high current account deficit, high inflation, overheating economy) and perceived policy weaknesses. Market volatility in Turkey has subsided since the turbulence in August, but the economic situation remains fragile. Turkey’s large external exposure leaves it vulnerable to further market jitters and external monetary tightening. The external shock in the summer of 2018 also translated into significant real sector impacts, including a sharp acceleration in inflation from already elevated levels. The gap between consumer and producer price inflation widened significantly since July, reflecting suppliers’ inability to pass on priceincreases to consumers due to declining demand. High production costs together with slowing demand have prompted supply side adjustments.
Turkey Economic Monitor, May 2018 - Minding the External Gap, 2018
A strong policy response - on the back of fiscal buffers, a strong financial system, and favorabl... more A strong policy response - on the back of fiscal buffers, a strong financial system, and favorable external conditions - enabled Turkey to recover from its shock of 2016, with growth accelerating to 7.4 percent in 2017. The outcome of supply constraints and demand impulse are reflected in high inflation; a large current account deficit; and currency volatility. The developments are weighing on private sector confidence despite the ongoing boost to sales, employment, and profits. Enabling an orderly adjustment is important for productivity and potential output. Turkey has been prone to large economic swings in the past. The greater the volatility in growth, the more pronounced is the negative impact on productive investment and efficiency of resource allocation. The possibility for monetary policy to respond to adverse external developments is more challenging. A combination of high inflation (due to demand pressures, exchange rate passthrough, and higher production costs) on the one hand, and rising (and positive) policy rates on the other, creates challenges for a monetary stimulus in the event of an external shock. This challenge is exacerbated by the need to cool credit expansion, which has been above its long-term trend.
Turkey Economic Monitor, October 2019 - Charting a New Course, 2019
The Turkish economy has experienced major external adjustments over the past 12 months, including... more The Turkish economy has experienced major external adjustments over the past 12 months, including declining current account imbalances, reduced external debt of banks, and a recovery in portfolio flows. These have lessened the external vulnerabilities that had accumulated in the run up to the August 2018 currency shock. These adjustments have reduced the country's external financing needs and contributed to a more stable Lira, notwithstanding bouts of currency volatility in 2019 Q2 and Q3. The adjustments were aided by somewhat agile policy responses and more favorable (than expected) global monetary conditions. Even so, foreign exchange reserves have gotten eroded over the past two years, exposing Turkey to external market pressure. The real sector remains deeply affected by the persistence of macro-financial vulnerabilities. Investment significantly decreased – contracting for four quarters in a row (till 2019 Q2) – whilst industrial production points to a weak turnaround. The gradual recovery from recession in 2018 H2 has been fueled by a pickup in private consumption and net external demand. The decline in inflation has begun, after exchange rate pass-through and episodes of loss of confidence in the Lira had sharply increased consumer prices, averaging 17 percent in the first three quarters of 2019. A gradual decline in producer prices since October 2018 has helped close the gap between PPI and CPI inflation and reduced pass-through pressures on consumer prices. Stagnating output levels, rising costs of production, and high consumer prices have led to significant job losses and falling real wages. Turkey's economy lost around 840 thousand jobs from May 2018 to May 2019, amounting to 2.9 percent of total employment. The unemployment rate increased from 10.6 percent to 14 percent between May 2018 and May 2019, with the youth seeing a jump in their unemployment rate from 19.6 to 25.6 percent. Average real wages declined by 2.6 percent between 2017 and 2018. The rise in unemployment and decline in real wages was experienced by workers across the skills and education spectrums. Poorer households have been the most impacted because many low-income workers are employed in construction and agriculture—the sectors that saw the biggest decline in jobs. Moreover, the long-term impact of a drop in real wages is significantly greater for the poorest households since they have limited coping mechanisms.
Turkey Economic Monitor, April 2021 - Navigating the Waves, 2021
COVID-19 (coronavirus) has taken a heavy toll on Turkey, as it has across much of the world. New ... more COVID-19 (coronavirus) has taken a heavy toll on Turkey, as it has across much of the world. New estimatesof total COVID-19 cases indicate that the epidemic grew rapidly over November and into December, before a new round of restrictions were put in place to control the spread of the virus in late December. The expansion of COVID-19 in late 2020 followed a similar path to many European countries. Turkey’s economic growth performance in 2020 was strong compared to other countries, but poverty spread, and unemployment became more prevalent. Turkey’s GDP grew by 1.8 percent in 2020, which was the fastest amongst G20 countries in 2020 aside from China. This was on the back of one of the strongest economic rebounds in the second half of 2020, largely achieved in the third quarter, but with positive growth continuing into the fourth quarter. Despite measures to support jobs and households, labor market and poverty outcomesnevertheless deteriorated. Indicators of domestic demand showed some signs of economic growth cooling early in 2021, although supply side measures such as industrial output remainedrobust. Turkey responded to COVID-19 with a large economic stimulus program, focused on credit channels. In fiscal terms, Turkey’s COVID-19 stimulus package amounted to nearly 12 percent of GDP when including tax deferrals and contingent liabilities. This is larger than the average for emerging market, G20 countries, and is similar in size to the stimulus packages of the United States, Australia and Canada. While the program utilized a broad range of fiscal tools, uniquely amongst G20 countries, Turkey’s support was overwhelmingly provided through the banking sector, and was not realized as direct fiscal costs on the budget, but ascontingent liabilities to the government in future. Credit stimulus, loose monetary policy, andother regulatory measures to promote credit expansion drove a sharp increase in economicactivity in late 2020. In addition to government measures to recapitalize a partial credit guarantee fund and state banks, policy interest rates were maintained below inflation and a series of financial regulatory measures introduced that incentivized banks to increase lending activities. The combined effect of these policies was to generate one of the largest credit expansions that the world saw in 2020.
Despite an initial surge in COVID-19 cases, cross country data suggests that Turkey contained rel... more Despite an initial surge in COVID-19 cases, cross country data suggests that Turkey contained relatively quickly the spread and worst health effects of the virus. As in other countries, however, continued vigilance is essential to sustain this fragile trend. Turkey’s pandemic response may offer some lessons, notwithstanding country specific conditions. Turkey implemented social distancing, mobility restrictions and health policies relatively quickly. This may have enabled more targeted measures compared to countries that reacted later, forcing them into more widespread lockdowns. Targeted measures in turn could have helped contain the spread of the virus, mortality rates, and perhaps even some of the decline in economic activity. Lessons from other countries suggest that health, social distancing and some mobility measures should be maintained to prevent the risks of a second wave. The economic impact of the COVID-19 health crisis has understandably derailed a fragile economic recovery in Turkey. By the second half of 2019, the economy started to gradually recover from the shock of the mid-2018 economic turmoil. Inflation moderated and external balances narrowed. The situation turned quickly by March 2020 – the TEM takes stock of the economic impact of COVID-19 through five different channels.
Country Economic Memorandum: Firm Productivity and Economic Growth in Turkey, 2019
Turkey’s pace of income convergence has globally been one of the most remarkable of the past fift... more Turkey’s pace of income convergence has globally been one of the most remarkable of the past fifteen years. Sustaining growth and improvements in living standards in Turkey will require higher productivity in the economy. The Turkey Productivity Report (2019) provides an in-depth analysis of firm productivity in Turkey and how this adds up to economic growth in the country. The report has six parts. The first two provide macro and micro diagnosis of productivity in the economy – what are the productivity trends, how have these affected economic growth, what firms in what industry are the most productive, and are they absorbing an increasing or decreasing share of resources? From here the report analyzes specific policy areas that might explain firm productivity dynamics in Turkey – namely firms’ integration in the global economy, access to innovation support, the quality of human capital, and the business environment including competition. The report finds that economic integration and innovation have boosted firm-level productivity, though reforms could further accelerate these positive impacts. Productivity gains could accelerate the demand for more educated and skilled workers. The growth of more productive firms could in turn also be accelerated through reforms that increase competition and reduce regulatory burden.
Maldives Development Update, October 2024: Seeking Stability in Turbulent Times, 2024
This work is a product of the staff of The World Bank with external contributions. The findings, ... more This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy, completeness, or currency of the data included in this work and does not assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the use of or failure to use the information, methods, processes, or conclusions set forth. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be construed or considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved.
Maldives Development Update, May 2024 - Scaling Back & Rebuilding Buffers, 2024
This work is a product of the staff of The World Bank with external contributions. The findings, ... more This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy, completeness, or currency of the data included in this work and does not assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the use of or failure to use the information, methods, processes, or conclusions set forth. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be construed or considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved.
Maldives Development Update, October 2023: Batten Down the Hatches, 2023
This work is a product of the staff of The World Bank with external contributions. The findings, ... more This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy, completeness, or currency of the data included in this work and does not assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the use of or failure to use the information, methods, processes, or conclusions set forth. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be construed or considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved.
Maldives Development Update, April 2023: Navigating a Tight Line, 2023
This work is a product of the staff of The World Bank with external contributions. The findings, ... more This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy, completeness, or currency of the data included in this work and does not assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the use of or failure to use the information, methods, processes, or conclusions set forth. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be construed or considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved.
Maldives Development Update, October 2022: Towards Resilient and Affordable Housing, 2022
Driven by a rebound in tourism, Maldives’ economy continued to recover strongly in 2022, and
pove... more Driven by a rebound in tourism, Maldives’ economy continued to recover strongly in 2022, and poverty is expected to return to pre-pandemic levels by end-2022.
Leveraging Global Value Chains for growth in Turkey : A Turkey Country Economic Memorandum, 2022
Turkey saw phenomenal growth in the 2000s as economic reforms ushered in FDI, GVCs expanded, and ... more Turkey saw phenomenal growth in the 2000s as economic reforms ushered in FDI, GVCs expanded, and productivity increased. The early 2000s saw Turkey exit from major economic crisis with a strengthened fiscal framework, a strengthened, inflation-targeting mandate for the Central Bank, the establishment of an independent bank regulator, and importantly, a recently agreed Customs Union agreement with the EU. From 2001 to 2017, incomes per capita in Turkey doubled in real terms and tripled in current dollar terms. Turkey transformed from a lower-middle-income country (LMIC) at the start of the 2000s to very nearly reaching high-income status by 2014. This drove a rapid fall in poverty from above 30 percent to just 9 percent. Very few other countries matched Turkey’s growth over this period, and almost all of them were new EU member states.
Turkish housing valuations appear to be stretched benchmarked against a variety of standard metri... more Turkish housing valuations appear to be stretched benchmarked against a variety of standard metrics. However, macroeconomic spillovers from housing market risks may be contained, as the household sector still has buffers to cushion against possible price corrections. House prices show a strong relationship with financial and labor market conditions, as well as mortgage debt affordability. Housing developers, however, are highly leveraged with significant FX exposures, and relatively high NPL ratios.
Non-financial corporate sector (NFC) debt has increased substantially in recent years, on the bac... more Non-financial corporate sector (NFC) debt has increased substantially in recent years, on the back of increased foreign currency (FX) leverage. This has translated into a large and widening net open FX position. Partially mitigating these developments, the maturity of FX debt has lengthened, thereby alleviating firms’ short term refinancing, and interest rate risks. Indeed, the corporate sector has been resilient through a period of marked exchange rate depreciation as well. However, a sizable portion of NFC FX debt is held by more vulnerable sectors with less favorable natural hedging and debt service capacity. These vulnerabilities have, on balance, become larger, and could become a source of brittleness when economic and financing conditions turn less supportive. Over the short term, concentration of NFC FX leverage in a few non-tradable industries may also pose risks for the domestic banking sector. The growing disconnection between higher NFC borrowing and private investment in recent years may also have implications for the country’s medium term growth potential.
After a long term of experiencing imbalances in the economy mainly due to the
deterioration in d... more After a long term of experiencing imbalances in the economy mainly due to the
deterioration in debt, Turkey managed to solve its structural macroeconomic problems with
the support of strong reforms, political stability and regulatory improvements regarding the
financial system after 2002. This dissertation aims to illustrate the 2003 fiscal consolidation
programme in Turkey by using Miller and Zhang’s basic dynamic fiscal consolidation model.
The basic model is used to simulate the convergence path of debt to the target for high/low
inflation and changing real interest rate scenarios. The impacts of high inflation on fiscal
consolidation have been underlined. Then, banking system regulations, macro structural
reforms and the role of Bretton Woods institutions are discussed. Furthermore, under the
light of Turkish experiences, policy recommendations are provided for the other nations that
are suffering from very high debt levels.
The Maldives Country Climate and Development Report (CCDR) analyses climate change and developmen... more The Maldives Country Climate and Development Report (CCDR) analyses climate change and development challenges and opportunities in the country in an integrated manner.
The report focuses on the Maldives achieving six high-level objectives: (1) improving macroeconomic stability and fiscal space to enable climate action, (2) mobilizing climate finance, (3) enhancing the climate resilience of islands and infrastructure, (4) enhancing the climate resilience of ecosystems, (5) enhancing the climate resilience of livelihoods (fishers and tourism), and (6) unlocking the development benefits from green transitions in energy, mobility, and waste sectors.
The CCDR contributes original research into key dimensions of climate resilience in the Maldives, including sea-level rise impact modeling on land, infrastructure, and economic activities; ocean heating impact modeling on fishing and coral reef degradation; and survey work to understand climate change adaptation efforts of and associated challenges faced by tourist resorts.
The recommendations presented in the CCDR will support the country in facilitating its climate resilience and green transitions, giving due consideration to the macroeconomic vulnerabilities at the time of releasing the report.
Türkiye Public Finance Review: Leveraging Fiscal Resources for Stability and Resilience, 2023
Reforms since the early 2000s have helped transition Türkiye’s fiscal policies and institutions f... more Reforms since the early 2000s have helped transition Türkiye’s fiscal policies and institutions from obstacle to enabler of development. At the end of the nineties, fiscal policy was hostage to the large inefficiencies of an SOE dominated public sector. The drain on the budget was financed by the central bank and short-term external credit. External debt levels were unsustainable and interest obligations crowded out development expenses. These fueled macroeconomic instabilities and were a drag on sustainable growth. Fast forward ten years to 2010. A robust macro-fiscal framework was providing a stable platform relieved from the pressures of high debt. This helped accelerate revenue collection, whilst enabling a reprioritization of spending towards development priorities. Fiscal buffers helped Türkiye recover quickly from the Global Financial Crisis and provided cushion for further shocks in the 2010s.
Turkey Economic Monitor, February 2022 - Sailing Against the Tide, 2022
Turkey’s economic performance has been a tale of two economies, overall high growth, matched by a... more Turkey’s economic performance has been a tale of two economies, overall high growth, matched by a deterioration in macro-financial conditions. Good progress in vaccination rollouts allowed Turkey to reopen gradually in 2021 despite a continued rise in Coronavirus (COVID-19) cases. Real economic activity remained strong, driven by strong broad-based export growth and domestic demand. Exports of goods reached record high levels in 2021 supported by buoyant external demand, improved price competitiveness and demand shifts to Turkey due to rising shipping costs. Turkey’s GDP grew by 22 percent year-on-year in 2021Q2–the second highest among G-20 countries–and 7.4 percent in 2021Q3. Strong goods and services export performance helped current account deficit to narrow significantly. Robust economic activity led to strong revenue growth and supported fiscal balances. The labor market saw a good recovery in 2021 and employment levels surpassed pre-pandemic levels, supported by buoyant economic activity. The regional inequalities of the COVID-19 shock manifested in larger impacts for women from Eastern regions, widening pre-existing gender gaps. The authorities began to cut interest rates in September, by 500 basis points by the end of 2021, despite rising inflation and inflation expectations. This has exacerbated macro-financial conditions and impacted investor confidence - causing financial market turbulence, large deprecation of the Lira, higher inflation, and increased dollarization. The Lira has been the most depreciating currency among emerging market economies this year. The large depreciation of the Lira coupled with rising international prices caused inflation to increase to its highest rate since the August 2018 shock.
Turkey Economic Monitor, December 2018 - Steadying the Ship, 2018
Mid-2018 was a period of intense market volatility and rising economic stress in Turkey that was ... more Mid-2018 was a period of intense market volatility and rising economic stress in Turkey that was precipitated by existing macroeconomic imbalances and elevated political tensions with the United Staes. A confluence of burgeoning domestic economic imbalances and a more challenging external environmentled to a dent in investor confidence in Turkish assets and a sharp slowdown in capital flows to Turkey in 2018 Q2-Q3. Though this did not technically amount to a sudden stop, Turkey was particularly badly affected by a general move away from emerging markets (EMDE) due to its accumulated macro imbalances (high current account deficit, high inflation, overheating economy) and perceived policy weaknesses. Market volatility in Turkey has subsided since the turbulence in August, but the economic situation remains fragile. Turkey’s large external exposure leaves it vulnerable to further market jitters and external monetary tightening. The external shock in the summer of 2018 also translated into significant real sector impacts, including a sharp acceleration in inflation from already elevated levels. The gap between consumer and producer price inflation widened significantly since July, reflecting suppliers’ inability to pass on priceincreases to consumers due to declining demand. High production costs together with slowing demand have prompted supply side adjustments.
Turkey Economic Monitor, May 2018 - Minding the External Gap, 2018
A strong policy response - on the back of fiscal buffers, a strong financial system, and favorabl... more A strong policy response - on the back of fiscal buffers, a strong financial system, and favorable external conditions - enabled Turkey to recover from its shock of 2016, with growth accelerating to 7.4 percent in 2017. The outcome of supply constraints and demand impulse are reflected in high inflation; a large current account deficit; and currency volatility. The developments are weighing on private sector confidence despite the ongoing boost to sales, employment, and profits. Enabling an orderly adjustment is important for productivity and potential output. Turkey has been prone to large economic swings in the past. The greater the volatility in growth, the more pronounced is the negative impact on productive investment and efficiency of resource allocation. The possibility for monetary policy to respond to adverse external developments is more challenging. A combination of high inflation (due to demand pressures, exchange rate passthrough, and higher production costs) on the one hand, and rising (and positive) policy rates on the other, creates challenges for a monetary stimulus in the event of an external shock. This challenge is exacerbated by the need to cool credit expansion, which has been above its long-term trend.
Turkey Economic Monitor, October 2019 - Charting a New Course, 2019
The Turkish economy has experienced major external adjustments over the past 12 months, including... more The Turkish economy has experienced major external adjustments over the past 12 months, including declining current account imbalances, reduced external debt of banks, and a recovery in portfolio flows. These have lessened the external vulnerabilities that had accumulated in the run up to the August 2018 currency shock. These adjustments have reduced the country's external financing needs and contributed to a more stable Lira, notwithstanding bouts of currency volatility in 2019 Q2 and Q3. The adjustments were aided by somewhat agile policy responses and more favorable (than expected) global monetary conditions. Even so, foreign exchange reserves have gotten eroded over the past two years, exposing Turkey to external market pressure. The real sector remains deeply affected by the persistence of macro-financial vulnerabilities. Investment significantly decreased – contracting for four quarters in a row (till 2019 Q2) – whilst industrial production points to a weak turnaround. The gradual recovery from recession in 2018 H2 has been fueled by a pickup in private consumption and net external demand. The decline in inflation has begun, after exchange rate pass-through and episodes of loss of confidence in the Lira had sharply increased consumer prices, averaging 17 percent in the first three quarters of 2019. A gradual decline in producer prices since October 2018 has helped close the gap between PPI and CPI inflation and reduced pass-through pressures on consumer prices. Stagnating output levels, rising costs of production, and high consumer prices have led to significant job losses and falling real wages. Turkey's economy lost around 840 thousand jobs from May 2018 to May 2019, amounting to 2.9 percent of total employment. The unemployment rate increased from 10.6 percent to 14 percent between May 2018 and May 2019, with the youth seeing a jump in their unemployment rate from 19.6 to 25.6 percent. Average real wages declined by 2.6 percent between 2017 and 2018. The rise in unemployment and decline in real wages was experienced by workers across the skills and education spectrums. Poorer households have been the most impacted because many low-income workers are employed in construction and agriculture—the sectors that saw the biggest decline in jobs. Moreover, the long-term impact of a drop in real wages is significantly greater for the poorest households since they have limited coping mechanisms.
Turkey Economic Monitor, April 2021 - Navigating the Waves, 2021
COVID-19 (coronavirus) has taken a heavy toll on Turkey, as it has across much of the world. New ... more COVID-19 (coronavirus) has taken a heavy toll on Turkey, as it has across much of the world. New estimatesof total COVID-19 cases indicate that the epidemic grew rapidly over November and into December, before a new round of restrictions were put in place to control the spread of the virus in late December. The expansion of COVID-19 in late 2020 followed a similar path to many European countries. Turkey’s economic growth performance in 2020 was strong compared to other countries, but poverty spread, and unemployment became more prevalent. Turkey’s GDP grew by 1.8 percent in 2020, which was the fastest amongst G20 countries in 2020 aside from China. This was on the back of one of the strongest economic rebounds in the second half of 2020, largely achieved in the third quarter, but with positive growth continuing into the fourth quarter. Despite measures to support jobs and households, labor market and poverty outcomesnevertheless deteriorated. Indicators of domestic demand showed some signs of economic growth cooling early in 2021, although supply side measures such as industrial output remainedrobust. Turkey responded to COVID-19 with a large economic stimulus program, focused on credit channels. In fiscal terms, Turkey’s COVID-19 stimulus package amounted to nearly 12 percent of GDP when including tax deferrals and contingent liabilities. This is larger than the average for emerging market, G20 countries, and is similar in size to the stimulus packages of the United States, Australia and Canada. While the program utilized a broad range of fiscal tools, uniquely amongst G20 countries, Turkey’s support was overwhelmingly provided through the banking sector, and was not realized as direct fiscal costs on the budget, but ascontingent liabilities to the government in future. Credit stimulus, loose monetary policy, andother regulatory measures to promote credit expansion drove a sharp increase in economicactivity in late 2020. In addition to government measures to recapitalize a partial credit guarantee fund and state banks, policy interest rates were maintained below inflation and a series of financial regulatory measures introduced that incentivized banks to increase lending activities. The combined effect of these policies was to generate one of the largest credit expansions that the world saw in 2020.
Despite an initial surge in COVID-19 cases, cross country data suggests that Turkey contained rel... more Despite an initial surge in COVID-19 cases, cross country data suggests that Turkey contained relatively quickly the spread and worst health effects of the virus. As in other countries, however, continued vigilance is essential to sustain this fragile trend. Turkey’s pandemic response may offer some lessons, notwithstanding country specific conditions. Turkey implemented social distancing, mobility restrictions and health policies relatively quickly. This may have enabled more targeted measures compared to countries that reacted later, forcing them into more widespread lockdowns. Targeted measures in turn could have helped contain the spread of the virus, mortality rates, and perhaps even some of the decline in economic activity. Lessons from other countries suggest that health, social distancing and some mobility measures should be maintained to prevent the risks of a second wave. The economic impact of the COVID-19 health crisis has understandably derailed a fragile economic recovery in Turkey. By the second half of 2019, the economy started to gradually recover from the shock of the mid-2018 economic turmoil. Inflation moderated and external balances narrowed. The situation turned quickly by March 2020 – the TEM takes stock of the economic impact of COVID-19 through five different channels.
Country Economic Memorandum: Firm Productivity and Economic Growth in Turkey, 2019
Turkey’s pace of income convergence has globally been one of the most remarkable of the past fift... more Turkey’s pace of income convergence has globally been one of the most remarkable of the past fifteen years. Sustaining growth and improvements in living standards in Turkey will require higher productivity in the economy. The Turkey Productivity Report (2019) provides an in-depth analysis of firm productivity in Turkey and how this adds up to economic growth in the country. The report has six parts. The first two provide macro and micro diagnosis of productivity in the economy – what are the productivity trends, how have these affected economic growth, what firms in what industry are the most productive, and are they absorbing an increasing or decreasing share of resources? From here the report analyzes specific policy areas that might explain firm productivity dynamics in Turkey – namely firms’ integration in the global economy, access to innovation support, the quality of human capital, and the business environment including competition. The report finds that economic integration and innovation have boosted firm-level productivity, though reforms could further accelerate these positive impacts. Productivity gains could accelerate the demand for more educated and skilled workers. The growth of more productive firms could in turn also be accelerated through reforms that increase competition and reduce regulatory burden.
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Papers by Erdem Atas
poverty is expected to return to pre-pandemic levels by end-2022.
strong relationship with financial and labor market conditions, as well as mortgage debt affordability. Housing developers, however, are highly leveraged with significant FX exposures, and relatively high NPL ratios.
banking sector. The growing disconnection between higher NFC borrowing and private investment in recent years may also have implications for the country’s medium term growth potential.
deterioration in debt, Turkey managed to solve its structural macroeconomic problems with
the support of strong reforms, political stability and regulatory improvements regarding the
financial system after 2002. This dissertation aims to illustrate the 2003 fiscal consolidation
programme in Turkey by using Miller and Zhang’s basic dynamic fiscal consolidation model.
The basic model is used to simulate the convergence path of debt to the target for high/low
inflation and changing real interest rate scenarios. The impacts of high inflation on fiscal
consolidation have been underlined. Then, banking system regulations, macro structural
reforms and the role of Bretton Woods institutions are discussed. Furthermore, under the
light of Turkish experiences, policy recommendations are provided for the other nations that
are suffering from very high debt levels.
Books by Erdem Atas
The report focuses on the Maldives achieving six high-level objectives: (1) improving macroeconomic stability and fiscal space to enable climate action, (2) mobilizing climate finance, (3) enhancing the climate resilience of islands and infrastructure, (4) enhancing the climate resilience of ecosystems, (5) enhancing the climate resilience of livelihoods (fishers and tourism), and (6) unlocking the development benefits from green transitions in energy, mobility, and waste sectors.
The CCDR contributes original research into key dimensions of climate resilience in the Maldives, including sea-level rise impact modeling on land, infrastructure, and economic activities; ocean heating impact modeling on fishing and coral reef degradation; and survey work to understand climate change adaptation efforts of and associated challenges faced by tourist resorts.
The recommendations presented in the CCDR will support the country in facilitating its climate resilience and green transitions, giving due consideration to the macroeconomic vulnerabilities at the time of releasing the report.
poverty is expected to return to pre-pandemic levels by end-2022.
strong relationship with financial and labor market conditions, as well as mortgage debt affordability. Housing developers, however, are highly leveraged with significant FX exposures, and relatively high NPL ratios.
banking sector. The growing disconnection between higher NFC borrowing and private investment in recent years may also have implications for the country’s medium term growth potential.
deterioration in debt, Turkey managed to solve its structural macroeconomic problems with
the support of strong reforms, political stability and regulatory improvements regarding the
financial system after 2002. This dissertation aims to illustrate the 2003 fiscal consolidation
programme in Turkey by using Miller and Zhang’s basic dynamic fiscal consolidation model.
The basic model is used to simulate the convergence path of debt to the target for high/low
inflation and changing real interest rate scenarios. The impacts of high inflation on fiscal
consolidation have been underlined. Then, banking system regulations, macro structural
reforms and the role of Bretton Woods institutions are discussed. Furthermore, under the
light of Turkish experiences, policy recommendations are provided for the other nations that
are suffering from very high debt levels.
The report focuses on the Maldives achieving six high-level objectives: (1) improving macroeconomic stability and fiscal space to enable climate action, (2) mobilizing climate finance, (3) enhancing the climate resilience of islands and infrastructure, (4) enhancing the climate resilience of ecosystems, (5) enhancing the climate resilience of livelihoods (fishers and tourism), and (6) unlocking the development benefits from green transitions in energy, mobility, and waste sectors.
The CCDR contributes original research into key dimensions of climate resilience in the Maldives, including sea-level rise impact modeling on land, infrastructure, and economic activities; ocean heating impact modeling on fishing and coral reef degradation; and survey work to understand climate change adaptation efforts of and associated challenges faced by tourist resorts.
The recommendations presented in the CCDR will support the country in facilitating its climate resilience and green transitions, giving due consideration to the macroeconomic vulnerabilities at the time of releasing the report.