Will the USD hit under 1.92 TL by the end of the year?
Fatih Özatay, PhD
29 August 2013
Chairing a central bank is a craft, to be executed with wisdom, not algorithms. “Don’t be surprised if the US dollar hits under 1.92 TL by the end of 2013” said Central Bank governor Erdem Başçı in his speech broadcasted live by economy news channels Tuesday morning.
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Overpraising (once again)
Fatih Özatay, PhD
27 August 2013
The problem is that, Turkey already has been close to the seventeenth place in the world’s ranking of largest economies. Stephen Grosz is a psychoanalyst. His first book The examined life: How we lose and find ourselves? was published this year and made it to the best sellers. In chapter three, the book proves that unbounded praises can give way to undesired outcomes.
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Is ideological foreign policy a curse to the economy?
Fatih Özatay, PhD
24 August 2013
If you were a foreign fund manager, would you be willing to invest your funds into a country which is in bad terms with almost all of its neighbors and is “strongly condemned” by the US? On Thursday lira depreciated against euro and dollar. The interest on ten-year Treasury bill reached 10 percent, and that on two-year bill exceeded 9.5 percent. The stocks exchange dropped sharply. As of Friday morning, the rise in exchange rate and interest rates stopped, but did not drop back again while the stocks index was floating slightly. Such sharp movements are not new in Turkey. It happened in 2001, 2004, 2006, and also more recently. But this time, there is an irritating detail. I would like to share that hoping that I am wrong. I am citing from Murat Yetkin’s commentary from Thursday: “When
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Would it be better if the CB did not increase the rate?
Fatih Özatay, PhD
22 August 2013
Raising interest rate might prevent an excessive increase in the exchange rate. But at the end of the day, you cannot escape your fate. The Central Bank Monetary Policy Committee’s (MPC) decisions in its yesterday meeting and the previous meeting are closely related to Turkey’s low savings rate. Since the domestic savings rate is extremely low, you have to borrow from abroad so as to achieve a certain level of investment. Turkey’s savings rate is low for a long time; this is not a recent phenomenon. It is only that the savings rate has decreased further to a lowest-low recently.
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Domestic savings from the short-term and long-term perspective
Fatih Özatay, PhD
20 August 2013
In conclusion, Turkey cannot keep up with rich countries just by raising savings and investments. Last Thursday I compared domestic savings rates of Turkey, upper-medium income countries that includes Turkey, and emerging market economies (with a regional classification). According to this, Turkey’s domestic savings rate was extremely low. Yesterday in Star, Eser Karakaş made critical assessments taking departure from that commentary of mine.
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Some of this, some of that
Fatih Özatay, PhD
17 August 2013
We sure do not desire a drastic increase in these rates within a short time frame. But given the low domestic savings rate, all you can do is to wait for your destiny. I have not been writing about the credit statistics for a long time. The last observation in the datasheet on my computer that I constructed with the method the Central Bank uses (annualized rate of growth in thirteen-week average credit volume compared to the previous week) was for May. As of today, weekly figures for the early August are available. So I decided to update the database. When I did, however, I could not believe my eyes. Remember the Central Bank once declared that for financial stability the credit growth rate should not exceed 15 percent?
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Savings are astonishingly low
Fatih Özatay, PhD
15 August 2013
Turkey’s savings rate is low in comparison to not only the BRICs but also developing and upper-middle income countries. I previously compared the savings rates of Turkey, the BRICs (Brazil, Russia, India and China) and South Korea. It was not a pleasant picture for Turkey. The upper rows of the Table 1 below compares Turkey’s savings rate with that of developing countries. I used the data and the categorization of the IMF. Lower rows show Turkey’s performance compared to “upper-middle income countries” as categorized by the World Bank on the basis of GDP per capita. I ranked the countries by their GDP per capita in 2012 and excluded small countries off the list. I gave the observations for three sub-periods: 1990-2001, 2002-07 during which Turkey attained high growth rates, and 2008-12 whi
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The second half 2013 at a glance
Fatih Özatay, PhD
13 August 2013
Industrial output growth in the first quarter was radically below the impressive rates in 2011. Yet, there is the bright side of the story. Industrial output figures for June were released yesterday. I will focus on the three-month averages to clear off monthly fluctuations in figures. In the second quarter of the year industrial output increased by 3.2 percent. This is significantly below the impressive rates in 2011. In fact, it is even below that in the first half of 2012, when per capita GDP growth was almost zero. Yet, there is the bright side of the story and here it goes:
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Why gold imports are increasing?
Fatih Özatay, PhD
10 August 2013
The current environment is evidently marked by uncertainties, which is the nemesis of the confidence in the economy. Although a week has passed after its release, I would like to comment on the foreign trade statistics for June benefiting from the bayram break.
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Turkey’s evaporating competitive advantage
Fatih Özatay, PhD
06 August 2013
Competitive advantage based on exchange rate proves temporary in the end turning into inflation and fading away shortly. Consumer price inflation (CPI) figures for July were released yesterday. Annual CPI reached 8.9 percent. The hike in the headline indicator (the l index) is particularly worrisome. The indicator floated within a narrow corridor over the last eight months averaging 5.7 percent while in July it reached 6.1 percent.
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