Turkey to revise per capita GDP amid income trap debatesNovember 30, 2014, Sunday/ 17:24:23/ TODAY'S ZAMAN / ISTANBUL
Turkey's official statistics agency says it is preparing for a revision in calculating the country's per capita gross domestic product (GDP), a step that it expects will put the average income figures at a higher level.
The decision comes amid criticism by economists that Turkey is stuck in the middle-income trap, adding that the emerging country's per capita income in dollar terms has stalled for seven years. Turkish Statistics Institute (TurkStat) Chairman Birol Aydemir told reporters over the weekend in Ankara that the agency “will recalculate Turkey's income per capita, using a more diversified calculation system with increased data.”
The TurkStat move has been criticized for being politically motivated, aimed at making per capita income look higher. Others said this plan seeks to boost the government's popularity, particularly among the middle class, ahead of parliamentary elections scheduled for June 2015. TurkStat, however, rejects such criticisms, and says it is not trying to give a better picture of the country's current economic condition, citing other European countries that have recently made similar revisions in per capita GDP. TurkStat says it needs to adjust its calculations in line with Eurostat standards.
One critical factor is Turkey's lingering deep income inequality. According to Credit Suisse's Global Wealth Report 2014, released in October, the gap between Turkey's rich and poor continues to expand, with 10 percent of the population holding 78 percent of the total wealth in the country. The monthly minimum wage in Turkey stands at TL 891 ($391), while the country's jobless rate was 10.1 percent in August.
The government plans to lift Turkey from about 17th into the top 10 global economies, with a per capita income of $25,000, by 2023 -- the 100th anniversary of the foundation of the modern state. Market experts, however, warn that these goals are too ambitious to realize given the current economic performance of the country even though falling oil prices have recently helped improve external balances, a major weak point for the Turkish economy. GDP stood at $1.44 trillion in 2013, according to International Monetary Fund (IMF) calculations.
After rising in leaps and bounds between 2002 and 2007, Turkey's per capita income in dollar terms has stalled at around $11,000 since 2007. Likewise, foreign direct investment (FDI) peaked the same year at $22 billion, and has since hovered around $12-13 billion a year.
According to the IMF, Turkey ranks 62nd on a list of 183 countries sorted by their per capita GDP, while the World Bank puts the country in 68th place among 189, both 2013 listings. The listing by global organizations do not take into account differences in the cost of living, and GDP per capita can also vary based on fluctuations in the exchange rates of the country's currency.
Reform calls
Without TurkStat's revision, income per capita was expected to fall $270 from 2013 to $10,572 this year. Following the revision, however, the figure surges by nearly $1,500 at once, bringing the GDP per capita to the level that was originally targeted for 2017.
TurkStat made a similar revision back in 2008, boosting the GDP per capita figures by $2,000 in one day.
Aydemir, meanwhile, has complained that the rich and educated parts of Turkish society have failed to file their wealth correctly with the public offices. “We have to raise awareness and use other data. …people are not sharing the exact size of their income and wealth with the state,” he asserted. His comments underline the discrepancies in Turkey's tax collection system. Market experts warn that Turkey has to implement structural reforms, such as more comprehensive tax collection, if it wants to reduce poverty and empower the middle class amid falling growth rates. The country's lopsided tax system draws two-thirds of its revenue from indirect taxes while collecting only a small portion of income tax from wealthier people.
Turkey has failed to introduce an effective reform package to maintain a steady improvement in its per capita GDP, Turkish Union of Chambers and Commodity Exchanges (TOBB) Chairman Rifat Hisarcıklıoğlu said last week.
A set of planned economic reforms introduced by Prime Minister Ahmet Davutoğlu earlier this month have yet to come to life, while observers say they doubt the reforms will remedy Turkey's long-standing structural weaknesses.
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