Derviş: Turkey promises a lot, could become a leading economy by 2023

19 September 2011, Monday

The Brookings Institution Vice President Kemal Derviş, who is also an advisory board member at Sabancı University, has said that Turkey could become one of the leading economies in the world by 2023 if its current dynamism continues over the next decade.

Kemal Derviş previously served as the Minister of Finance in Turkey for more than a year after the country was hit by two financial crises in early 2000s.

Kemal Derviş previously served as the Minister of Finance in Turkey for more than a year after the country was hit by two financial crises in early 2000s.

“Turkey has made significant progress in the last 10 years; its population is quite dynamic and the private sector and all working Turks have made great contributions to the national economy. However, everybody knows that you cannot remain untouched by the current negative developments in global markets. For instance, Turkey was also affected from the global financial crisis of 2009 when developed economies experienced a recession. You cannot expect a country like Turkey, whose economy is integrated in the world, to be untouched by developments around the world.

However, Turkey can make more progress in the coming 10 years as it has done in the past 10 years. Maybe after a long journey it can join the world’s leading economies by 2023, the 100th centennial of the Turkish Republic, with the continuation of this current dynamism,” Derviş told the Anatolia news agency on Sunday in New York.

Following a high-profile scandal that touched the International Monetary Fund (IMF) in May, when Dominique Strauss-Kahn was forced to step down, the position of chief was left wide open for several strong candidates. Many top news agencies around the world named Derviş as one of the leading candidates for the top IMF position. Turkey’s ruling Justice and Development Party (AK Party) government gave its full support to Derviş, who was also the former head of the United Nations Development Programme (UNDP). However, Derviş said he would not run for the top IMF job. Former French Economy Minister Christine Lagarde was later chosen as the new IMF chief.

Derviş, a former finance minister in Turkey, commented about developments around the world, observing there are very serious economic problems in some countries. “Budget talks in the US that became deadlocked, the debt crisis in formerly wealthy countries and political mechanisms in the US, Europe and Japan that aren’t working completely, have led to serious problems in the world economy,” Derviş said.

“On the other hand, the debt problem in the eurozone shows that without political partnership, a monetary union is not possible. A joint monetary policy should be developed in the eurozone or the euro will face even more severe problems,” he said.

“It is very pleasing to see emerging countries such as Turkey achieving high growth figures. However, like many experts underline, the high current account deficit [CAD] exposes a vulnerability to [the Turkish] economy. A CAD around 4-5 percent is sustainable but a CAD at 8 percent or greater is high. Therefore, anything [that can be done] should be done to lower this figure; I am sure everyone is aware of this issue. To decrease the CAD long-term structural reforms should be implemented and more importantly, domestic savings should be increased,” outlined Derviş.

After the economic meltdown around 2001 in Turkey, the coalition government appointed Derviş, who was the World Bank vice president, as its economy minister and pinned all its hopes on him to sort out the country’s economic turbulence. It was a time when 11 banks went bankrupt, the İstanbul Stock Exchange (İMKB) recorded a historic 18.1 percent loss in shares on Feb. 21, 2001, overnight interest rates on loans reached 7,500 percent and the lira lost half its value following a domino effect of events. Referring to those hard times in 2001, Derviş said it was common sense in the country that enabled it to emerge from that crisis.

“Like every single person who experiences hard times personally, countries can also witness some hard times. Turkey was able to overcome its economic crisis in 2001 and better policies have been implemented since that time. However, I think that the Turkish people and their dynamism was the real determinant behind the country overcoming that crisis. The common sense of the people while enduring the difficult times is the real story behind the economic success of Turkey since 2001,” he noted.