OECD
26.01.2021
The COVID-19 crisis has hit Turkey’s people and economy hard,
accentuating pre-existing challenges such as the low share of workers in
formal employment and obstacles to firm expansion. Well-designed
support to households and firms that is aligned with a return to
macroeconomic stability, and reforms to improve competition and labour
laws, institutions and business would help to build a lasting recovery,
according to a new OECD report.
“Turkey is looking at a gradual recovery from the
COVID-19 crisis and risks persist for growth and well-being,” said
Alvaro Pereira, OECD Director of Economic Country Studies. “The focus
should be on restoring macroeconomic stability and seeing the
post-crisis period as an opportunity to encourage foreign and domestic
investment through stronger public governance, and to use market and
labour reforms to empower businesses to grow and create quality jobs.”  Once
a recovery is under way and investor confidence restored, the Survey
estimates that a combination of market, institutional and education
reforms could lift GDP per capita by 1% per year over the coming years.
Market liberalisation reforms should include removing anticompetitive
regulatory barriers in product markets, increasing labour market
flexibility and reducing corporate income tax, while institutional
reforms should improve public governance and the formalisation of
business activities. While the dynamism
of Turkey’s business sector, and the country’s strong entrepreneurial
spirit and youthful workforce, have been an asset through the COVID-19
pandemic, the majority of Turkish firms are very small and have limited
capacity to weather a protracted slowdown. Significant parts of the
business sector rely on informal or semi-formal practices in employment,
corporate governance, financial transparency and tax compliance. Easing
overly stringent regulations on product and labour markets and
simplifying business and tax systems would make it easier for young
firms to grow and move to the formal sector. A modernized and more
efficient business sector would also help firms to emerge stronger from
the crisis. In terms of labour reforms, cutting
non-wage labour costs, shifting part of the cost of social protection
to sources other than payroll contributions, making statutory minimum
wages affordable for low-productivity firms, and modernising regulations
for temporary as well as permanent contracts would stimulate the
creation of formal jobs once the recovery takes hold. Education
reforms should seek to enhance adult skills in a country which ranks
among the highest in the OECD for qualification mismatch, with 43% of
the working population either over-qualified (29%) or underqualified
(14%) for their job. Investing more in Research & Development and in
digital technology and infrastructure would also raise growth
prospects.
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