The future of Turkey’s economy, if it is to continue to make strides, depends on the energy sector.
The production economy isn’t fully developed yet in Turkey; hence the growth rate has been slowed in order to decrease inflation and to stabilize the current account deficit, which has reached an almost uncontrollable level. The growth rate, which was 6 percent in 2006, will probably decrease to around 5 percent in 2007.
The rising market economies we compete with such as China, Korea and the eastern European countries have increased their growth by between 7 and 10 percent. If Turkey’s growth performance falls below 7 percent, it will be unable to produce the necessary employment or cope with the increasing gap with its competitors. It will also be insufficient to close the growth gap between Turkey and the European Union. Therefore, decreasing inflation by slowing the economy with high interest rates will be a tragicomic “success,” just as dead people no longer feel any pain.
We believe this is a temporary situation. Once the reforms and regulations to determine the basic parameters of the production economy are initiated, there will be fewer problems. In such a case, Turkey will be able to have reasonable interest rates (5 percent on a real basis) and a moderate current account deficit (4 percent of GNP) as well as moderate inflation (4 percent) and public debt (30 percent of GNP and below). At the same time, Turkey will be able to achieve a growth rate above 7 percent.
One of the requirements to succeed in this is the development of a cheap energy sector with supply security. Despite being a considerably “slow” year in terms of economics, the energy supply increased by 10 percent in 2007. The average supply increase, calculated at the end of the year, is expected to be even larger. According to certain calculations, should all the power plants work at full capacity without any outages, Turkey would still have an energy bottleneck in 2009. These figures and the interpretations of them are official public data; this means that energy supply security is under serious threat.
As shown in the table, the electricity consumption per capita in Turkey is below the world average. The Turkish people consume less than one-third that consumed by people in the European Union. Without a doubt, consumption will increase in Turkey. Thus, the first goal of the Turkish economy is to attain a GNP of $800 billion. Should the growth rate reach 7 percent, the demand for electric energy will be 240 billion kilowatt hours (kWh) in 2010 and 496 billion kWh in 2020.
The energy investment needed within the next 10 years is $130 billion. But in order to reach that level, the sector needs capital, a free market that will open the way for technology and the flow of investment, and establishment of a qualified regulation and control mechanism for the public sphere. Privatization has the ability to kick start this process.
Should energy waste remain at current levels, Turkish industrialists will be unable to use “cheap energy” due to the lack of productivity even if the amount of energy produced is sufficient. Regardless of the low energy consumption per capita in Turkey, the energy used for production is very high per unit. Turkey spends two-fold what the EU does and four times Japan’s expenses for production.
Turkey's energy profile
2005 energy consumption - 160.2 bln kWh
2005 installed capacity - 38,500 MW
Electricity consumption per capita (world) - 2,500 kWh
Electricity consumption per capita (EU) - 6,500 kWh
Electricity consumption per capita (Turkey 2005) - 2,200 kWh
Annual electricity consumption increase (Turkey 2007) - 10% (estimate)
Annual electricity consumption increase last 20 years (Turkey) - 8 percent
Estimated electricity demand 2010 (Turkey, annual growth 7%) - 240 bln kWh
Estimated electricity demand 2020 (Turkey, annual growth 7%) - 496 bln kWh
Source: İbrahim Öztürk, Sohbet Karbuz, Turkey's economy for oil and energy, MÜSİAD, 2006.
