: Favorable economicprospects encourage Turkey to strengthen its presence in the Middle East North Africa(MENA) region. By leveraging both its geographical prox-imity and a series of bilateralagreements on free movementof people and goods, Turkey
is signicantly increasing its
exports to the region, whichnow account for more than aquarter of its total exports. Thisis supporting rapid economicrecovery and the growing assertiveness of Turkishforeign policy in the region.Sustainability of economicgrowth in the medium- tolong-term requires structuralreforms to improve productivityand enhance competitiveness.
However, reforms have a signi
-cant political cost, and areslowed down by the upcoming elections. If the governmentdoes not take advantage of the current favorable condi- tions to achieve these reforms,Turkish economy prospects willbe damaged. This would alsoweaken the economic founda- tions of current Turkish foreignpolicy in the MENA region.
Mediterranean Policy Program—Series on the Region and the Economic Crisis
Turkey as a Regional Economic Actor:Successes and Weaknesses
by Franco Zallio
1744 R Street NWWashington, DC 20009T 1 202 745 3950F 1 202 265 1662E firstname.lastname@example.org
Prepared in Partnership with Paralleli (Turin) November 2010
Turkey’s 2010 economic growth is thehighest among the OECD. Among G20countries, it is lower only than that o China and India. In the rst hal o the year, real GDP grew by 11 percent andorecasts indicate a ull year growth o 8 percent. Turkey’s data on employ-ment is quite signicant given the sharpcontrast with the trend in the EU andthe United States. Between July 2009and July 2010, total employment grewby 1,265,000 positions, mostly in theindustry and services sectors (933,000),while unemployment rate droppedrom 14.0 percent to 11.7 percent.
The high economic growth simulta-neously supports and is supportedby the growing regional assertive-ness o Turkey. Strong commercialinterests bind Turkey to the regionalcontext and its success in gaining newmarkets in the region has sustainedits economic growth at a time whentraditional markets (primarily the EU)
Franco Zallio is senior consultant to Paralleli, and haspublished extensively on issues related to the econom-ics and international relations of the Mediterranean and the Middle East. The views presented in this paper are the personal views of the author and not those of theinstitutions he represents or The German Marshall Fundof the United States. These papers are translated from theItalian by Kamilah Khatib.
Unemployment is closely correlated to economic growth,as shown by the previous boom-and-bust cycles.
are stagnating ater the sharp all in2008-2009.However, both Turkey’s outstandingeconomic perormance and its growingregional assertiveness need to pass asustainability test: will Turkey be able toconrm its recent economic successesin the medium to long term, or, as ithas oten happened in past decades, willthese successes prove to be only transi-tory? I the latter is true, the currentregional assertiveness o Turkish oreignpolicy may prove too ambitious.This brie examines the two mainchallenges the Turkish economy has toace: its strong reliance on the oreigncapital that nances the wide tradedecit caused by the high importelasticity o growth and internationalcompetitiveness. The link betweenthe two is evident: low productivity reduces international competitiveness,and increasing the trade decit alsoincreases dependence on oreign capital.
Turkish Foreign Trade and theIncreasing Role of Regional Partners
In the rst eight months o 2010,Turkey registered a trade decit o $42billion according to data rom customson a ree on board/cost, insurance and