2014年-世界发展银行全球_Turkey_Public_Finance_Review___Turkey_in_Transition--Time_for_a_Fiscal_Policy_Pivot__82页_2mb

Summary of the Public Finance Review for Turkey

Core Content

This report provides an in-depth analysis of Turkey's fiscal policy dynamics from 1999 to 2012, highlighting its role in driving economic growth and improving social outcomes. It also outlines key trade-offs and policy options for the future, emphasizing the need for a fiscal policy pivot to support more sustainable and domestically financed growth.

Main Points

• Economic Growth and Social Outcomes: Turkey experienced rapid economic growth and significant improvements in social indicators over the past decade. Per-capita income in USD terms tripled, and the country became the world's 17th largest economy. Social outcomes, such as infant mortality and life expectancy, improved substantially due to increased government spending and better public service delivery.

• Fiscal Policy Success: Turkey's fiscal policy was a key component of its macroeconomic reform program, which included strong fiscal consolidation, improved banking supervision, and a shift to a flexible exchange rate regime. This policy helped maintain macroeconomic stability and reduce public debt to less than 40% of GDP by 2012.

• Public Debt and Revenue Trends: The public debt to GDP ratio declined from 36% in 2012, largely due to the reduction in interest payments and the increase in government revenues. The shift from direct to indirect taxation, along with rising social contributions, played a major role in this trend.

• Fiscal Space and Trade-offs: The report highlights that the fiscal space for growth promoting spending is changing. The previous model of growth supported by foreign financing and high current spending is becoming less viable. There is a need to shift toward public investment and increase domestic savings to reduce reliance on external financing.

• Public Investment and Private Sector: Public investment can crowd-in private investment and promote sustainable growth. However, this requires efficient execution, appropriate risk allocation, and a focus on productive sectors.

• Capital Taxation and Property Taxes: A modest increase in effective capital income taxation and property taxes could help increase domestic savings and improve the allocation of investment to more productive areas.

• Female Labor Force Participation: Increasing female labor force participation is crucial for sustaining government revenues and economic growth. Structural reforms to improve female formality and employment rates could support this objective.

• Structural Reforms: Beyond fiscal policy, structural reforms in the business environment, regulatory framework, and public finance management are necessary to enhance competitiveness, attract foreign direct investment, and support export-led growth.

• Fiscal Policy Pivot: The report suggests that a fiscal policy pivot is needed to shift from a model of foreign-financed growth to one that is more domestically driven. This includes reorienting expenditure and revenue policies to focus on public investment and increasing national savings.

Key Information

• Fiscal Outcomes: General government revenues increased from 27% of GDP in 2000 to 33% in 2012, while expenditures rose from 21.7% to 35% of GDP. The primary fiscal balance fluctuated, with a surplus of 5% in 2007 and a deficit of -0.3% in 2009, but it was restored to 1.7% in 2012.

• Interest Payments: Interest payments declined significantly from 14.1% of GDP in 2000 to less than 10.7% in 2012, contributing to the reduction in the fiscal deficit.

• Tax Composition: Indirect taxes now make up over 50% of total central government tax receipts, and almost 14% of GDP. This shift from direct to indirect taxation was driven by increased domestic demand and declining informal employment.

• Social Contributions: Social contributions increased as more people entered the formal sector, contributing to government revenue growth.

• Informal Employment: Informal employment has declined significantly but remains high, which is a concern for fiscal sustainability.

• Public Investment: Public investment has been a key driver of growth, but its impact has been limited by inefficiencies and lack of prioritization. A shift in expenditure composition toward public investment is recommended.

• Policy Simulations: The report presents several policy simulations, including reducing social contributions, lowering the minimum wage, and increasing female labor force participation, which could help boost formal employment and economic growth.

• Challenges Ahead: As the structural transformation of the economy slows, alternative revenue sources and expenditure cuts will be needed to sustain fiscal space. Structural reforms in the business environment and public finance management are also emphasized as essential for long-term growth.

Policy Recommendations

• Increase Effective Capital Income Taxation: A modest increase in capital income taxation can help offset the decline in indirect tax revenues and support domestic savings.

• Property Tax Increase: Increasing property tax revenues can promote a better allocation of investment to productive sectors and reduce housing investment.

• Reduce Social Contributions: Lowering social contributions can help boost formal employment and reduce the fiscal burden on the government.

• Lower Minimum Wage: A reduction in the minimum wage could improve the competitiveness of the labor market and boost employment.

• Increase Female Labor Force Participation: Structural reforms to increase female labor force participation can help sustain government revenues and economic growth.

• Reorient Fiscal Policy: Shift expenditure from current spending to public investment and focus on improving the business environment and public finance management to support sustainable growth.

Conclusion

The report concludes that while Turkey's fiscal policy has been successful in driving growth and improving social outcomes, a pivot is needed to support more sustainable and domestically financed growth. This includes structural reforms to improve female labor participation, increase domestic savings, and shift fiscal priorities toward public investment. These changes are essential to ensure long-term economic stability and growth.