However, when their election manifestos are analyzed more deeply, it becomes clear that they are quite prompt in defining the problems but rather naive in their proposals. In fact, rather than offering concrete solution packages and an proposals for their implementation, they preferred to make generous promises to the citizens without convincing us about the sources of such huge expenditures. Most of the current problems exhibit post-stabilization characteristics, in the sense that unlike many of the problems behind the severe business fluctuations during the 2001 crisis that required relatively short-run macroeconomic stabilization policies, now we face deeper problems, which require long-term-oriented and well-defined reform agendas.
Today I want to define basic problems that require a long-term-oriented structural vision, and next week submit my proposals for possible solutions.
1- The ability of the current economic model to create jobs is quite limited.
2- Although Turkey has successfully closed the domestic deficit (i.e., the budget deficit) with the help of the current model, the same model, however, led to huge external deficits (i.e., the current account deficit).
3- It seems that Turkey’s increasing openness is not helping to increase domestic (national) savings in order to reduce the ever-increasing savings-investment gap. Accordingly, there is an increasing awareness that financial integration is creating an environment in which foreign savings are substituted for domestic ones.
4- High-import dependency in production and export is not receding. More realistically, the current exchange rate structure does not help the revival of many sub sectors in industry so as to satisfy rising needs of export as well as domestic market-oriented industries.
5- Despite quite big improvements in the cost of public as well as private finance, the current level of real interest rates is still dramatically higher as compared to many other emerging market economies.
6- Despite the volume of portfolio investment having declined in comparison to 2006, there is still a huge amount of “hot money” inflow into Turkey, a potential to trigger economic fluctuations in the event of both domestic as well as global negative changes.
7- Although consumer price inflation declined almost more than sevenfold within five years since 2002, it seems that at the current level of around 8-10 percent, there is a quite serious inflationary inertia, which jeopardizes the continuation of economic improvements.
8- Our economy is still fragile and therefore its high degree of openness and integration to the world economic system has taken control of the economy beyond domestic government and firms. This creates serious uncertainty for economic agents.
