Turkey can achieve strong sustainable growth and job creation but further reforms in the labour market, education and product markets are required for such gains to materialise. In recent years, growth has been largely driven by the industrial catch-up of Anatolian regions, although the Marmara area in the West has also been very dynamic. In the process, labour force participation has started to rise anew, but around one third of new low-skilled jobs have been created in the informal sector. Sustaining vigorous growth over the longer run therefore requires pushing ahead with a number of structural reforms. First, Turkey’s rigid labour market regulation needs to evolve, so as to encourage job creation in the formal sector. Second, further progress with education reform, from pre-school all the way to the tertiary level and vocational training, is needed to boost growth and bring about employment gains in the formal sector. Third, implementing product market reforms, notably in network industries, would unleash productivity gains in those sectors and be a boost to the rest of the economy. A set of alternative growth scenarios through 2030 illustrates how progress on these various fronts can deliver lasting improvements in living standards. This Working Paper relates to the 2012 OECD Economic Survey of Turkey (www.oecd.org/eco/surveys/turkey).
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