Unleashing the full potential of the Turkish business sector

Productivity in Turkey has been growing stronger than in most peer countries since 2010 but has slowed down. Despite a remarkably entrepreneurial population, business dynamism has also been less vigorous in recent years. This working paper discusses the factors behind this slowdown and analyses a wide range of structural policies that would help to revive productivity growth and unleash the full potential of the Turkish business sector. The elevated number of informal, semi-formal and fully formal forms constitutes a key impediment to higher growth and more high-quality jobs. Structural reforms that allow more flexibility in labour markets, more competition in product markets and major progress with the quality of governance would foster productivity growth, job creation but also boost the digital transformation. Streamlining and simplifying the complex system of regulations and government support schemes would prevent firms from clustering around eligibility thresholds and thus remove obstacles to the upscaling of firms.