The TEPAV Financial Stress Index
Fatih Özatay, PhD
23 April 2013
The TEPAV Financial Stress Index foresees the possibility of economic contraction in a given quarter two to three months ahead. GDP figures are released with a delay. Growth figure for the first quarter of 2013 will be released in mid-June. Changes in the level of economic activity are of importance for everyone. In all market economies, growth rates show a fluctuating outlook. GDP growth fluctuates in quite a smooth pattern with upward movements for four to five quarters followed by a movement in the opposite direction. For instance, Turkey’s annual GDP growth decreased constantly between the first quarter of 2011 and the last quarter of 2012. GDP growth is expected to pick up starting with the first quarter of 2013.
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World Economic Outlook from a short-term perspective
Fatih Özatay, PhD
18 April 2013
Concerning Turkey’s major trading partners, growth estimate was revised down by 0.2 points for European Union and by 0.3 points for Middle East and North Africa. The first World Economic Outlook Report of 2013 by the International Monetary Fund (IMF) was released. As you might know, the IMF releases first the technical chapters and later the complete report with core chapters. The latest report seems to have driven the most optimistic picture for the world outlook compared to its precedents. I would like to highlight some points which I think are critical.
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MPC decisions in April meeting
Fatih Özatay, PhD
17 April 2013
The Monetary Policy Committee of the Central Bank (MPC-CB) held its April meeting yesterday. The MPC decided to cut the policy rate and the interest rate corridor by 0.5 points. Also, it increased the reserve option coefficient, ROC, which determines the share of lira required reserves that banks are allowed to keep in FX.
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Monetary Policy Board convenes
Fatih Özatay, PhD
16 April 2013
Will the MPC reduce the policy rate? It might, by 0.25 points if it decided to cut the interest rate corridor. But it would be quite difficult to explain the grounds. The Central Bank (CB) Monetary Policy Committee (MPC) will hold its April meeting today. Below is a summary of developments concerning the variables the CB targets.
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Targeting real exchange rate and reducing volatility
Fatih Özatay, PhD
13 April 2013
The exchange rate regime almost becomes a pre-determined fixed-growth exchange rate regime. Before the latest shower of data, I was talking about a severe economic illness which many countries suffer. I referred to economies that have higher consolidated FX liabilities in comparison with their FX earnings. Economies that could not have completely normalized, in other words. Turkey is among these. In such economies, makers and executers of economic policy face a fundamental dilemma. But first, there are two points I want to stress.
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Caution against over-information
Fatih Özatay, PhD
11 April 2013
I just want to stress that we have to be cautious and avoid over-excitation when using seasonally and working day adjusted series. Last time I said over-information might be problematic for people who try to interpret the information. For instance, for industrial output, raw, seasonally adjusted, and seasonally and working day adjusted figures are released. In fact, it is good that the Turkish Statistical Institute, TURKSTAT, releases all three series. But if not handled with care, the three “states” of industrial output cause misinterpretations.
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Are the signals clearer?
Fatih Özatay, PhD
09 April 2013
With the industrial output growth in February, however, those signaling the start of a moderate recovery are stronger now. The most popular question lately is whether or not the economy started recovering in the last quarter. Yesterday another relevant piece of information was released: industrial output figures for February. I do not rely on seasonally and working day adjusted figures except for certain occasions. I will address the reason in detail next time if the agenda allows. I am interested rather in the year-on-year changes in industrial output, and hence I will examine the working day adjusted figures this time.
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A long way to go
Fatih Özatay, PhD
06 April 2013
For the consumer price inflation to decrease to 5 percent, headline inflation must decrease to 3 percent. I want to continue with inflation dynamics from where I left on Thursday. Some of you might think that in the week when we learned that growth performance was way below the potential, two commentaries on inflation is too much. But it is not. The fall in inflation is not necessarily counter to growth. This is supported by many academic studies. But I will just present some figures today. Annual inflation rates in Turkey were 8.8 percent in 2007; 8.9 percent in 2010, and 8.9 percent in 2012. Respective annual growth rates were 4.7 percent, 9.2 percent and 2.2 percent. In the studied years, average inflation was almost the same while growth rates were diverse: Growth was close to the pote
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A new perspective on inflation
Fatih Özatay, PhD
04 April 2013
Global competitiveness cannot be improved simply by intentionally pushing up exchange rate. The concomitant inflation hikes offset the competitiveness effect. The rain of data is continuing. Yesterday inflation data for March was released. Actually, we were mainly focused on the growth figures, since growth rates have been in decline since the first quarter of 2011. We have been trying to answer when the downturn in growth will end, whether the recovery process has begun and if the 4 percent growth target is achievable. But inflation dynamics should never be neglected. The authorities that have to take inflation seriously might push the issue to the background or give this impression with their decisions and remarks. At least we, columnists, keep the issue on our radar.
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The economy grew only by 2.2 percent in 2012
Fatih Özatay, PhD
02 April 2013
Is Turkey’s sustainable growth rate so far assumed to be at the 4-4.5 percent interval declining? Gross domestic product (GDP) figures for 2012 were released yesterday: GDP growth rate decreased to 2.2 percent in 2012 from 8.8 percent in 2011. Indeed, this came as no surprise. In the late 2011, I discussed in an op-ed series the macroeconomic indicators for 2012 under different scenarios. The most reasonable one estimated 1 to 3 percent GDP growth for 2012. When GDP figures for the first quarter was released, I estimated year-end GDP growth at the 2.2-2.3 percent interval, in the light of the capacity utilization, real sector confidence, credit growth, industrial output growth and export figures. And here are some observations on the GDP figures:
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