Additional information needed on credit figures
Fatih Özatay, PhD
28 February 2013
Credit growth rates vary between the reports of intermediaries, banks and research institutes. Domestic credit growth rate has become an important variable for monitoring the monetary policy alongside the consumer price index (CPI) inflation and real exchange rate. The Central Bank (CB) has been setting targets for all the three, explicitly or implicitly. The inflation target is declared at the beginning of the year, as per the relevant law. Real exchange rate and credit growth rate targets are expressed either in several meetings by the CB governor or in CB reports.
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4 percent growth target in jeopardy
Fatih Özatay, PhD
26 February 2013
CUR figures for January and February reveal that industrial output might increase to some degree in Q1/2013, after the worst quarter of 2012 with this respect. February figures for two critical variables that inform us on the outlook of the Turkish economy were released last Friday. The first one is the capacity utilization ratio (CUR). In December, seasonally adjusted CUR increased month-on-month, which was read in support of economic recovery. If year-on-year change in the CUR was examined, however, the clear and deepening downwards trend in the ratio would have been identified. There is a close relationship between CUR and year-on-year changes in industrial output. In December, the latter decreased significantly. Yes, we should not take monthly fluctuations seriously. Nevertheless, outp
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Does Turkey encourage hot money inflows?
Fatih Özatay, PhD
21 February 2013
The question I want to answer is whether the Central Bank’s actions fit the purpose of not. Let’s say that you are considering bringing short-term funds to Turkey in order to invest in Turkish lira denominated financial assets. Compared to interest rates in advanced countries, even the minimum interest rate Turkey offers is remarkably higher. Take the lower limit of the Central Bank’s interest rate corridor, for instance: last Tuesday it was cut from 4.75 percent to 4.5 percent. It is still high enough.
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Because we said so, that’s why
Fatih Özatay, PhD
19 February 2013
This year, a system resembling the old one, which was not only unfair but also bad for education quality, was introduced without notice. Parents spend a lot so that their children receive high-quality education, and pass the examinations for science high schools, high schools that teach in English or at least a private school. Assume that your child passed the examination and started studying in one of these. But before he or she graduates, you take your kid from that school and try to place him or her to a “regular” one. Finding a new school for your child might put you into some trouble related to the legislation; but there are a number of options ahead. Anyway, there is no need to make effort to find mediocrity in Turkey.
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How to raise the savings rate?
Fatih Özatay, PhD
16 February 2013
With a longer-sighted perspective, it is clear that the way to leap to an upper league passes through anti-informality measures among others. It was three weeks ago when I last said “I will continue on this subject.” The subject was growth constraints and shopping lists. Now it’s time.
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5 percent? 6 percent?
Fatih Özatay, PhD
14 February 2013
No country can sustain such a high current account deficit over GDP ratio for a decade. Given the radically low domestic savings rate, current account deficit has to be assessed on the finance side. Of course this perspective ignores Turkey’s international competitiveness. For instance, it neglects productivity, production cost and exchange rate developments. Similarly, it leaves the economic outlook in the export markets (income growth) and domestic demand movements out off the analysis. Yet, it is obvious that the deficit finance-oriented perspective does not mean that other factors are insignificant. It is impossible to address all elements in a single commentary, though.
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Harder to raise reserve requirements
Fatih Özatay, PhD
12 February 2013
The latest industrial output figure might hinder a decision to raise the required reserve ratio. In the last quarter of 2012, industrial output increased only by 0.3 percent year-on-year, compared to 2.7 percent in the third quarter, which was believed to be the worst quarter concerning growth performance. In the first nine months of the year, average growth was 2.6 percent, substantially below the potential. The weak industrial output growth in the fourth quarter implies that year-end GDP growth rate might be around 2.3 percent. Indeed, this is a strong probability.
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The dangers of praising
Fatih Özatay, PhD
09 February 2013
Industrial output growth was the lowest in the fourth quarter. Hence, GDP growth rate might be lower than expected. In December, industrial output shrank year-on-year by 3.8 percent. Just a month before, in November, industrial output grew by 11.3 percent, which was interpreted by many that “production having taken wings.” I am really astonished by some interesting comments on economic developments in Turkey. I am not talking about mistakes or something. Rather I am talking about odd comments. Maybe we can call this “praises” as in folk songs and literature.
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The current picture concerning the CB's targets
Fatih Özatay, PhD
07 February 2013
If the appreciation pressure becomes more prominent by the time of the next MPC meeting, the CB will start to respond more aggressively. Today I would like to address the recent developments concerning the three targets of the Central Bank (CB) and the possible responses to these developments. I would like to stress in advance that I am interested in what the CB “will do” rather than what it “should do.”
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Reducing the entire year to December
Fatih Özatay, PhD
05 February 2013
In the last months we were told that inflation decreased remarkably although nothing had changed in the course of inflation since 2009 The inflation figures for January were released: consumer price index was up beyond expectations, reaching 7.3 percent. Does this imply an upwards trend in inflation? No it does not.
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