Turkey's per capita income on rapid decline - columnist

The economic constriction in Turkey, caused mainly by a decline in the construction sector and the rising dollar exchange rates, has led to a rapid decline in per capita income (PCI) in the country, columnist for the pro-government Habertürk Abdurrahman Yıldırım wrote on Tuesday.

With the 19.7 per cent increase in the dollar exchange rate in the first half of 2019, “the rise in exchange rates caused the gross national product (GNP) to drop by 67 billion dollars, and caused a 9.5 per cent drop in the PCI,” said Yıldırım.

In the last 5.5 years, the GNP dropped by 228 billion dollars from 950 billion dollars in 2013 to 722 billion dollars in the second quarter of 2019 (a 24 per cent decline), and the PCI dropped by $3,713, from $12,480 to $8,767 (a 29.8 per cent decline).  According to Yıldırım, a factor in this difference between the two figures was the rise in Turkey’s population from 76 to 82 million in the same period.

GNP calculations are based on the average exchange rate of the dollar, which was 4.72 for 2018 but rose to 5.6461 in the first half of 2019, noted Yıldırım. The six-month increase in the exchange rate was recorded as 19.6 per cent, which translated to the significant decrease in GNP numbers.

The annual contraction in the second quarter of 2019 was announced as 1.5 percent. Yıldırım said the biggest support to the GNP came from net exports and public spending, and that the biggest negative impact came from the sharp decline in investment.

Investment has declined in the last four quarters, and the decline in investment, including the construction sector, accelerated and shrank by 22.8 per cent, according to the columnist.

The construction sector had the biggest negative impact on growth in both the first and second quarters of 2019, said Yıldırım and added that the decline in this labour-intensive sector contributed to unemployment, which increased by 1.1 million in the last year to reach 4.5 million persons by May.

Some factors in the decline in investments were the crisis in construction, the rise in foreign currencies and interest rates, which also led to a decline in investment in machinery and equipment, said Yıldırım.

Non-agricultural unemployment was recorded at 16.2 per cent, while youth unemployment was at 25.5 per cent, added the columnist.

“The rise in unemployment led to income loss, thus decreasing consumption and slowing down growth. Unemployment and slowed-down growth created a downward spiral,” he said.

Turkey’s official figures showed that the size of the country’s economy fell to 722 billion dollars from 753 billion dollars in the first quarter. “Accordingly,” said Yıldırım, “PCI dropped to $8,767 from $9,693 in 2018,” bringing the loss of per capita income to $926, or 9.5 per cent.

Economist Ümit Akçay from the Berlin School of Economics and Law said, “It was fashionable once to call the 1990s ‘the lost decade’. The period from 2008 to 2019 also deserves this description now.”