Eser Karakaş
Apr 07 2019

How to read the IMF’s warning on Turkey’s economy

Independent of the results of Turkey’s March 31 local elections, in which the government consolidated its powers while the opposition achieved victories in major cities, Turkey needs to start taking measures for its economy.

Just 10 days before the election, Gerry Rice, the spokesperson of the International Monetary Fund (IMF) warned Turkey on the trouble knocking on its doors.

“There is a significant slowdown in the Turkish economy and the government needs to respond immediately and accurately to this problem," Rice said at a press briefing.

Turkey’s growth rate was 2.6 percent in 2018, the worst performance the country has had in the last decade. Though it is still early to predict the growth rate for 2019, there is a possibility of no growth. If that happens, Turkey will have to face serious problems, particularly in employment.

What Turkey needs to do is more or less evident to anyone. The country needs to enter a positive growth path as soon as possible. As the IMF’s warning shows, a very low or a negative growth rate not only affects the country but also creates negative externalities and risks for the world economy.

Turkey’s main agenda in the upcoming weeks and months should be how to direct the country toward sustainable growth. This should be the case because otherwise, it will witness a social and an economic catastrophe with low growth rates in a country where a considerable number of young people enter the job market each year.

It must be noted that Turkey itself is responsible for its low growth due to the decades-long poor quality education system, low savings, decaying in the rule of law, which, in turn, decreased foreign investment over the past few years.

It is really absurd to see low growth as something that is happening due to the manipulations of foreign powers.

Following the elections, Turkey has two important tasks at hand.

The first one is to take steps toward establishing an education system that will increase the number of young people in school and reach European standards. It’s hard to be optimistic that such measures will be implemented as the Turkish government’s approach to society and therefore the education system does not allow it to provide education services that are growth-friendly in the long run.

The vocational education system is a mess, as is the primary education system. Pre-school education opportunities are very limited, and most importantly, the quality of education in universities, particularly in graduate programs, is poor. And I believe the steps the government is willing to take for reforms in education are signalling a path in the opposite direction.

What is more worrying is the fact that the political opposition also lacks proposals for growth-friendly education. Both groups that dominate Turkey’s political landscape, the conservatives and the secularists, approach education as some support unit for their political objectives, rather than focusing on freedom, creativity, and efficiency. This in turn, unfortunately, implies that there will be no way out of this system in the long run.

Turkey has very low ranks among OECD countries in terms of education outcomes, however, nobody seems particularly concerned with this data. The average years of schooling have increased in the last decade, but that will not lead to a boost in human capital that is essential for growth as the quality of education being provided is quite low.

The second topic we should discuss following the local polls is the establishment of the rule of law, which complies with universal standards. This is relatively easier compared to improvements in the education system as steps in that direction will be supported globally and there are solid references available about what needs to be done. Yet, it also requires a more qualified human capital and a strong political will that has a firm resolve to strengthen the rule of law.

In education, political will is not sufficient, as improving the system requires at least 1 million high-quality teachers in the long run, while the economic downturn and the consequent pressures on the budget may not allow for such an investment, even if there is political will.

Before March 31 polls, Turkey mainly discussed topics like the survival of the state and economy, which I think are not meaningful. I say this because debates pertaining to the survival of the state became absurd without discussing education and the rule of law, as the latter the main factors that may risk the country’s survival rather than some political groups on Turkey’s southern border.

And it is not meaningful to promise a productive economy without discussing the education system and the rule of law. Production can increase only through a high-quality education system and the rule of law, whereas those referring to a productive economy all the time rarely talk about the steps that are essential for establishing such an economy.

Those two topics are what I understand from the IMF’s warning and Turkey has to take steps toward solving these essential problems instead of playing the tough guy against the IMF.

In fact, an IMF bailout will be inevitable should Turkey not roll up its sleeves to improve the education system and the rule of law.

The opinions expressed in this column are those of the author and do not necessarily reflect those of Ahval.