Article at a glance:
Turkey has liberalized its economy over the past 20 years, but its bid to join the European Union will likely hinge on its ability to make further gains in productivity. A McKinsey Global Institute study of 11 sectors of the Turkish economy found that they are achieving only half of their potential. Closing the gap would mean that Turkey could create six million jobs by 2015 and raise its GDP by 8.5 percent—a feat that would greatly improve the living standards of its 70 million people and substantially improve its chances for EU membership. This article gives an overview of Turkey's challenges and takes a closer look at the automotive, confectionery, and energy industries.
The take-away
Subpar productivity in Turkey generally stems from three problems: a large informal economy, macroeconomic and political instability, and government ownership. Reformers should focus their efforts on these three large arenas.