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Turkey - Public finance review : Turkey in transition - time for a fiscal policy pivot (English)

Turkey has experienced rapid growth and improved social outcomes over the past decade. Per-capita income in United States dollar (USD) terms tripled during the first decade of the 21th century, and Turkey is now the world's 17th largest economy. Fiscal policy was an important component of the reform program that delivered these successes. Prudent fiscal policy also provided the fiscal space to soften the blow of the global economic and financial crisis in 2008-2009. This report documents the central role played by fiscal policy over the last decade and presents simulation results from a computable general equilibrium model that will help inform the future direction of fiscal policy to support sustained high growth. The dynamics of fiscal outcomes and private investment and savings raise a series of tradeoffs for policy going forward. The analysis in this report suggests that public investment can crowd-in private investment and promote a more sustainable growth path. Government revenue dynamics present another set of trade-offs. These fiscal trade-offs are likely to be exacerbated as the structural transformation of Turkey's economy slows down. Structural reforms can support the fiscal policy pivot, particularly by strengthening the supply side of the economy, for instance through an increase in female labor force participation.

Details

  • Document Date

    2014/05/20

  • Document Type

    Public Investment Review

  • Report Number

    85104

  • Volume No

    1

  • Total Volume(s)

    1

  • Country

    Türkiye,

  • Region

    Europe and Central Asia,

  • Disclosure Date

    2014/07/28

  • Disclosure Status

    Disclosed

  • Doc Name

    Turkey - Public finance review : Turkey in transition - time for a fiscal policy pivot?

  • Keywords

    Fiscal policies;fiscal policy;Poverty Reduction &Economic Management;factor income;female labor force participation;computable general equilibrium model;life expectancy at birth;composition of tax revenue;tax rate on consumption;composition of government expenditure;government revenue;alternative source of revenue;quality of public service;personal income tax rate;Incremental Capital-Output Ratio;capital income tax rate;capital stock per capita;flexible exchange rate regime;Turkish Court of Accounts;decentralization of decision making;revenue from consumption taxes;small and medium enterprise;European Bank for Reconstruction;demand for health services;cost of health services;Justice and Development Party;increase in capital expenditure;Analytic and Advisory Activities;central government revenue;real interest rate;total tax revenue;prudent fiscal policy;social security contribution;central government tax;private saving rate;current account balance;global risk aversion;global financial crisis;Development Policy Loan;increase in consumption;real exchange rate;Public Finance Management;state owned enterprise;national saving rate;corporate income tax;government revenue growth;Access to Education;savings and investment;improvements in access;foreign direct investment;payroll tax revenue;Development Policy Operation;public investment spending;growth and development;tax on interest;debt management practice;explicit government liability;economic sector work;unemployment insurance fund;debt management committee;health insurance contributions;health insurance fund;pension fund contribution;guaranteed minimum income;labor market outcome;labor market trend;change in revenue;household saving rate;value added tax;financial reporting standard;taxing capital income;current account deficit;social security system;independent central bank;public investment expenditure;long term growth;Medical Insurance Plan;Country Partnership Strategy;labor market indicator;weights and measure;physical capital stock;source of financing;movement of labor;foreign capital inflow;social security institutions;composition of expenditure;emerging market economy;health insurance expenditure;capital income taxation;change in expenditure;rate of growth;social security fund;taxation of capital;pace of urbanization;unemployment insurance benefit;central government spending;formal labor market;allocation of investment;increased property tax;health insurance spending;indirect tax revenue;social security agency;domestic debt market;global capital flow;general equilibrium framework;primary fiscal deficit;general government expenditure;public investment program;public debt dynamics;change of expenditure;total public debt;social development perspective;domestic reform program;private sector borrowing;primary surplus targets;social security spending;public external debt;total government spending;long-term fiscal sustainability;cross country comparison;vat on import;labor market reform;social contribution;fiscal outcome;Capital Inflows;fiscal surplus;current expenditure;private investment;domestic saving;minimum wage;fiscal space;informal employment;domestic demand;fiscal prudence;fiscal consolidation;real gdp;global environment;external imbalance;tax policy;foreign finance;public saving;International Trade;primary balance;formal sector;agricultural labor;policy simulation;fiscal adjustment;universal health;Infant Mortality;social outcome;fiscal balance;primary level;minimum pension;empirical evidence;tax base;active debt;dramatic reduction;banking sector;Macroeconomic Stability;banking crisis;revolving fund;budget rigidity;saving investment gap;turkish lira;employment rate;live birth;universal enrollment;fiscal account;female employment;international standard;tax wedge;private consumption;net export;positive debt;global economy;macroeconomic reform;institutional improvement;interest expenditure;global liquidity;working age;contribution rate;employer's contribution;monthly income

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Citation

Turkey - Public finance review : Turkey in transition - time for a fiscal policy pivot (English). Public Expenditure Review (PER) Washington, DC ; World Bank Group http://documents.worldbank.org/curated/en/666141468317993814/Turkey-Public-finance-review-Turkey-in-transition-time-for-a-fiscal-policy-pivot