After initial success in fighting the COVID-19 pandemic and a strong economic rebound, Turkey faces a resurgence of cases which puts pressure on the country’s health system, public resources, social cohesion and macroeconomic sustainability. Public finances offer room for government support to the households and businesses most in need, but this should be provided under a more transparent and predictable fiscal, quasi-fiscal, monetary and financial policy framework. In the early phases of the pandemic, shortcomings in the macroeconomic framework weighed on market confidence, creating tensions in risk premia, capital movements and exchange rates, which complicated macroeconomic policy responses to the crisis. New demands and opportunities also arose for structural change in the business sector. Product, labour and capital market reforms, bundled with a comprehensive upgrading of vocational education, would accelerate the much needed formalisation of business activities, the re-balancing of firm balance sheets with external equity capital, and a broad-based digital modernisation. A stronger, more sustainable and more inclusive post-COVID growth trajectory would then be within reach.

SPECIAL FEATURE: UNLEASHING THE FULL POTENTIAL OF THE BUSINESS SECTOR