According to a recent report, Turkey risks being caught in a middle income trap as inequality persists.
Despite strong economic growth driven by consumer demand and construction activity over the past decade, income differences between social classes and regions are deepening.
“The gap between rich and poor has barely budged in our country,” said Suleyman Onatca, chairman of Turkish Enterprise and Business Federation (Türkonfed).
A recent Turkonfed report divides the nation into three income zones. The poorest 27 provinces are located in the southeast and east of the country, while provinces without a risk of being trapped in the middle income band mainly pile in the industrialised northwestern region.
“The at-risk provinces stretch from Artvin, the northeastern border province, to Canakkale in the west, covering a large area of Turkey,” reads the report.
The provinces with relatively sufficient income number around 14, while 40 others are facing a “middle income trap,” a term used by economists to describe an economy that plateaus around the middle income range for structural reasons.
The combined gross domestic product of the top 10 provinces — Istanbul, Ankara, Bursa, Eskisehir, Bilecik, Kocaeli, Sakarya, Bolu, Düzce and Yalova — amounts to $376 billion, surpassing some rich countries such as Singapore, Norway and Switzerland in economic size.
“We have three Turkeys today,” said Onatca. “This picture creates important clues in terms of regional development.”
“That means different policy designs and development prescriptions are needed for areas with different levels of income and development,” Onatca said.
“In fact, there is strong economic growth and a speedy reduction in unemployment for the young population in our country and these economic achievements cannot be ignored,” he said.
According to the Turkish Statistics Institute, the wealthiest quintile of the Turkish population earns eight times more income, or 46.7 percent of the nation’s wealth, compared to the poorest quintile which earned a mere 5.8 percent last year.
Turkey ranks third highest among 34 countries in the Organisation for Economic Co-operation and Development on a scale of income inequality.
In 2011, Turkey’s Gini co-efficient, a number used by economists to measure economic inequality whereby 0 means perfect equality and 1 represents absolute inequality, is estimated as 0.404, an increase of 0.002 points from the previous year.
Some critics, such as Faik Oztrak, deputy chairman and economic adviser for the Republican People’s Party (CHP), say inequality is an economic problem that could become a political problem if the government does not invest more in education, labour-intensive industries in poorer regions, and encourage women to enter the workforce.
“We’ve always said that the social state is missing in Turkey. These are the real problems and the government doesn’t want to address them,” he stated, noting that most jobs are created in the financial capital Istanbul, the administrative capital Ankara, and other urban centres.
Commenting on the Turkonfed report, Turkish Development Minister Cevdet Yilmaz told reporters on Monday (December 17th) that the poorest provinces of the country should be considered as “unused potentials,” and the government expects support from the private sector to boost local economies.
“The private sector couldn’t yet break the old habits … It is concentrating in certain regions and certain sectors,” he said.
(The Journal of Turkish Weekly)