Sinan Bayraktar (PhD)
Economist/Management Consultant/Academician
Over the years, the Turkish economy has consistently exceeded global growth standards on average.Why is it that, despite robust economic growth, people and the economy do not seem to find relief amidst high inflation and financial challenges?
I chose to begin my article with a question, as it has been a persistent inquiry I have encountered over the years. Throughout my extensive career of over 50 years in the field of economics, I try to address such questions through the analyses I have conducted.
Now let us try to look at the essence of the matter. Türkiye, after experiencing low growth rates in 2019 and 2020, achieved a remarkable growth of 11.6% in 2021 and maintained an average growth rate of 4.5% between 2018 and 2022.
During the 2018-2022 period, amid the global impact of the COVID-19 epidemic on economies, the average global growth rate for countries stood at around 2%. Notably, Türkiye achieved a growth rate of 5.5% in 2022, securing the 54th position among 196 countries. According to the latest data released, the Turkish economy expanded by 3.8% in the second quarter of 2023.
The Turkish economy exceeded expectations by growing at 5.9 percent in the third quarter of 2023 compared to the same period the previous year. However, the quarterly growth, although at 0.3 percent, fell well below expectations. Despite the slowdown in growth during the third quarter, the contribution of domestic demand was notable.
Sectorally, the growth performance in the third quarter of the year highlighted the notable contributions of the construction and industry sectors.
In the third quarter of 2023, the growth rates, measured as a chained volume index compared to the previous year, were as follows: construction grew by 8.1 percent, industry by 5.7 percent, services by 4.3 percent, and the agricultural sector by 0.3 percent.
Considering this data, let us take a step back and examine the situation more comprehensively. In 1984, as the political system shifted towards democratic governance and the economy transitioned from a controlled, state-owned model to a freemarket economy, a series of profound changes started to unfold. Two sectors began to leave their mark on the development and growth movement that started in those years.
Among these changes, the textile sector, originally established through import substitution, and the construction sector, initiated as Mass Housing and heavily reliant on imports for equipment and raw materials, played prominent roles.
The dynamism of these two sectors, which achieved extraordinary growth and provided high employment, brought movement to the country and, in my words, prosperity to inflation.
The combination of elevated deposit interest rates and substantial export incentives prompted individuals involved in these sectors to make numerous errors. Attempts to rectify economic data through significant devaluations, coupled with mistakes in controlling exchange rates, ultimately resulted in a severe economic crisis for the country, notably culminating in the decisions of April 5, 1994. These were seen as mistakes made to correct the existing structure in the economy, but Türkiye continued to grow. The persistent question of how this country’s growth figures maintain positivity amidst significant disintegration is consistently a focal point of discussion.
Upon examining the two key pieces of data in pursuit of an answer to this question, the true extent of the issue begins to unfold. Examining the latest index values from Turkey’s growth figures reveals a situation that has been ongoing for an extended period.
When we look at the figures that we share above, the importance of the index contribution of 8.1% becomes apparent.
This indicates that the country’s growth is predominantly driven by the construction sector. The construction sector, positioned as the primary industry capable of alleviating unemployment and even acting as a catalyst for the migration of unskilled labor from villages to cities, has consistently taken the forefront over the years. Its substantial growth has been parallel to the expansion of the service sector. This is where the contribution of raw materials, essential for the industry’s growth, comes into play. When we inquire about these factors, I attempt to encapsulate the subject by referring to the title of our article.
Following the administrative structural change in local governments in 1984, which introduced the metropolitan and district municipal systems in Turkish municipal administrations, there was a notable surge in public works services, emphasizing both infrastructure and superstructure development. The construction sector was among the industries fueled by unprecedented changes, marked by substantial construction activities and significant expenditure items.
In the recent period, it is evident that the total production of TURKÇİMENTO members, representing 94 percent of the sector, experienced a notable increase of 7.7 percent in the January-June period of 2023 compared to the same period of the previous year, reaching 36.7 million tons. The importance of cement becomes even more evident when we see that domestic sales increased by 14.4 percent in the 6-month period of 2023, reaching 28 million tons, and approximately 21.8 percent of the cement produced reached exports.
When we talk about cement, it becomes clear what can happen in the presence of cement.Cement, as the predominant material in residential and commercial construction, serving as a fundamental requirement in structural changes throughout history, is poised to maintain its dominance not only in this century but also in the centuries to come. I cannot help but emphasize another fact. It is acknowledged that the cement sector, along with its sister, the iron industry, exercises a crucial protective influence on our geo-strategic structure, considering the geographical location of our country and the ongoing earthquake risk. These sectors are expected to generate added value for our overall well-being.
I am confident that these sectors, whose enduring impact I believe will persist throughout the centuries, will imprint their influence on the significant developments of both our country and the world. This will be achieved through robust management, effective control, and adept managerial models.