Cablegate: Turkey: World's Fastest Growing Economy

This record is a partial extract of the original cable. The full text of the original cable is not available.

010451Z Apr 05

UNCLAS ANKARA 001867

SIPDIS

SENSITIVE

TREASURY FOR INTERNATIONAL AFFAIRS - MILLS/PLANTIER
NSC FOR BRYZA AND MCKIBBEN

E.O. 12958: N/A
TAGS: EFIN ECON TU
SUBJECT: TURKEY: WORLD'S FASTEST GROWING ECONOMY

1. (U) Summary: Turkey's real GDP grew by 8.9% in
2004, surpassing expectations and making Turkey one of
the fastest growing economies in the world -- if not
the fastest growing. A 14% increase in domestic demand
was driven by the private sector and evenly balanced
between consumption and investment growth. In dollar
terms, GDP per capita jumped 22.7% to $4,187 -- a
record high for Turkey. However impressive, such rates
of growth cannot be sustained unless Turkey continues
and deepens its reform process. End Summary.

2. (U) The State Institute for Statistics (SIS)
announced March 31 that final 2004 GDP reached 430.5
billion Turkish Lira (USD 301.0 billion) in current
prices, an 8.9% real increase from 2003. Reflecting
positive net factor flows, GNP also grew 9.9%. This
beat even the most optimistic market economists'
expectations, which averaged 7.8% for GDP and 8.5% for
GNP. The GOT had originally set a 5% GNP growth target
for 2004, which was revised to 10% later in the year.
This data brought per capita GDP to USD 4,187, from USD
3,412 in 2003. According to State Minister Babacan,
per capita income was USD 7,736 on a purchasing power
party (PPP) basis, a record high for Turkey.

3. (U) Growth was driven by the private sector and was
evenly-balanced between consumption and investment.
Private sector investment grew by 45.5% and private
consumption by 10.1%, driving a 14.1% increase in
domestic demand. Exports grew by 12.5%, while imports
increased 24.7%. By sector, the highest growth
contribution came from trading, which grew 12.8%. The
other two fastest growing sectors were industry (9.4%)
and business and personal services (8.0%). One of the
lowest contributions came from the agriculture sector,
which registered only a 2.0 percent increase for the
year as a whole, despite a 9.4% growth in the final
quarter. The lowest increases were in the financial
services (1.1%), and public services (1.2%) sectors.

4. (U) Following the data release, both State Minister
Ali Babacan and Deputy Prime Minster Abdullatif Sener
praised the AKP government's economic performance to
the press. Babacan said the 2004 growth rate was the
highest since 1966, and the PPP basis per capita income
of USD 7,736 was a record for Turkey. Babacan also
noted that growth was driven by the private sector, and
not based on a monetary or fiscal stimulus. DPM Sener
said the 2004 growth rate showed AKP government's
success in implementation of reforms. He noted that
2004 private sector investment expenditure grew 45.5%,
while public sector investment fell 4.5%. Sener also
pointed out that in 2004 the economy created 649,000
new jobs.

5. (SBU) Comment: Turkish officials are rightly proud
both of the growth rate and of the fact that it is
private sector-led. However, there is a risk that last
year's strong performance will contribute to
complacency on the part of policymakers in pursuing the
reforms required to sustain the very high levels of
growth over many years needed for Turkish incomes to
one day converge with the European average. To break
out of Turkey's historical patterns of busts following
booms, the government needs to make faster progress in
reducing the role of government in the economy through
privatization and deregulation, as well as in
maintaining its commitment to sound monetary and fiscal
policies. Turkey is not there yet.

6. (U) Detailed data is available at the SIS website:
http://www.die.gov.tr/ENGLISH/index.html
Edelman

© Scoop Media