External Balance and Growth in Turkey: Can They Be Reconciled?

Abstract

Turkey has, alone among the high-debt countries, managed to maintain a high growth rate after rescheduling its debt. Its real GNP grew by 5 per cent on average since 1980. By comparison, countries with recent debt-servicing problems, grew at only 1.2 per cent since 1981,² almost a four percentage point difference on average. At the same time, Turkey’s debt-output ratio increased by an amount roughly similar to the increase in the debt-output ratio of the high-debt countries, from 28 per cent at the end of 1980 to 56 per cent at the end of 1986 (see Table 7.1).

This paper draws on joint work at the World Bank with Roberto Rocha, to whom we are indebted for helpful discussions and to John Brondolo for research assistance. In addition, we would like to thank Rüşdü Saracoǧlu, Teoman Akgür, Hasan Ersel and Halûk Tükel of the Central Bank, Gazi Ercel of the Treasury and Yavuz Ege of the State Planning Organization in Turkey, Javad Khalilzadeh-Shirazi at the Bank and Dani Rodrik for comments and assistance at various stages of this project. The findings, interpretations, and conclusions do not represent official policy of the World Bank.