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    An amusing debate
    Fatih Özatay, PhD 05 July 2012
    In 2012 Turkey can achieve 4 percent growth as targeted in the Medium Term Program, which is in harmony with my expectations for soft landing. “Hardness” and “softness” are relative concepts. When the gross domestic product (GDP) figures for Q1 were announced, an amusing debate that had been shelved for some time came back on our agendas: will Turkey experience the economic slowdown as “soft landing” or a “hard landing?” Some of you might ask “why does it matter if it was hard or soft when the economy will eventually land?” And you are right. In Q1 2012 the economy grew by 3.2 percent compared to the impressive 11.9 percent in Q1 2011 and there is an evident “landing.”  Potential growth rate I would like to draw your attention to something so as to put an end to the soft vs. hard abstrac [More]
    Quite a soft landing
    Fatih Özatay, PhD 03 July 2012
    Though growth rates have decreased remarkably, there appears a soft rather than the dreaded hard landing. Gross domestic product (GDP) for the first quarter of 2012 was announced yesterday: annual growth rate in Q1 was 3.2 percent. Quarterly GDP growth rates since Q1 2011 were as follows: 11.9 percent in 2011Q1, 9.1 percent in 2011Q2, 8.4 percent in 2011Q3, 5.2 percent in 2011Q4 and lastly 3.2 percent in 2012Q1. Though growth rates have decreased remarkably, there appears a soft rather than the dreaded hard landing. Actually the landing was quite soft as I denoted above.  Foreign demand was the driving force [More]
    What the Ankara subway construction made me think…
    Fatih Özatay, PhD 30 June 2012
    When designing and implementing economic policies, “potential future budget deficits” must be taken into account. Now it is way easier to explain the troubles high public debt might cause. You can just cite the Greek or Italian example without making extensive technical remarks. Also, Spain is a “perfect” case on how deep-rooted problems in sectors that don’t seem to be related with the public sector – say the vulnerabilities of the banking sector – unexpectedly turn into a public sector challenge and jump the public debt, extending vulnerabilities towards the entire economy.  ‘Implicit’ liability [More]
    Second quarter’s growth outlook becomes clearer
    Fatih Özatay, PhD 28 June 2012
    It is highly probable that slow growth – zero or negative growth when adjusted to population growth – has pertained in the second quarter of the year. The latest data on the second quarter, real sector confidence index and subcomponents for June, was released last week by the Central Bank. The index being below 100 indicate that survey respondents composing of large companies of Turkey are not confident in the economy. Lower the index value, higher is the lack of confidence in the economy, and vice versa. During crisis periods, index value generally stands significantly below 100, as was the case in the late 2008 and in most of 2009. Since 2010, the index fell below 100 only once (in December 2011). We mustn’t regard that one-month observation, though. Thus, we can say that the real sector [More]
    Does Turkey always have to sacrifice growth?
    Fatih Özatay, PhD 26 June 2012
    Isn’t it a major weakness for Turkey to sacrifice growth in order to ease its current account deficit? The economy slowed down drastically in the first quarter of the year. Certain indicators suggest that the second quarter was no different in this respect. At best, the process of slow growth ends after the second quarter and Turkey’s economy switches to a phase of faster growth unless the European crisis deepens. But in the end, it is quite likely that Turkey will miss the growth target of 4 percent estimated in the Medium Term Program. In that case, the recovery in current account deficit might stop and be replaced with a moderate deterioration, despite the recent drops in oil prices. If the European crisis deepens and threatens global financial markets, however, this analysis will be vo [More]
    On inflation
    Fatih Özatay, PhD 23 June 2012
    If price of crude oil does not change, the future performance of inflation will depend on the exchange rate developments. In recent commentaries, I assessed economic developments with a growth-based perspective. Today, I want to comment on inflation. Consumer price inflation that floated around 10 percent since December and reached 11 percent in April has dropped sharply in May. Though a drop was anticipated, the magnitude was beyond expectations. The headline inflation indicator that gives a better idea about the possible future changes in inflation also performed positively. The headline inflation calculated with the L indicator implies that the upwards trend in inflation that started in the late 2010 has ended (Figure 1). [More]
    Is the second quarter different from the first? (2)
    Fatih Özatay, PhD 21 June 2012
    If the downturn in the index is over, is this sufficient evidence that economic recovery has started as of the second quarter? Figures suggest that first quarter’s annual growth rate will be below 2 percent. The pace of credit growth has started to rise again. At first glance, the upwards trend in credit growth as of April might give the implication that growth performance in Q2 will be different from that in Q1. But a deeper look proves this presumption wrong, for two reasons: first, we must expect a certain delay in the translation of the rise in credit growth into a recovery in industrial output via investment and consumption. Second one is about the movements in the leading indicators released by the Central Bank, which I will address on Thursday. [More]
    Is the second quarter different from the first?
    Fatih Özatay, PhD 19 June 2012
    It would not be a surprise if Q1 growth falls below 2 percent. More importantly, figures imply that Q2 growth might not be any different, either. Gross domestic product (GDP) for the first quarter will be announced in early July. GDP growth rate was recorded at an impressive 11.9 percent in the first quarter of 2011. Than the rate decreased steadily, finally arriving at 5.2 percent in quarter four. A much lower GDP growth rate is expected for 2012 quarter one. The second quarter of the year is about to end. I evaluated the available data during preceding commentaries. Today I want to discuss what those statistics imply for GDP growth in the first half of the year. [More]
    Unemployment resistant again
    Fatih Özatay, PhD 16 June 2012
    Before the global crisis, unemployment rate had stuck at 10.3 percent. Now unemployment rate stuck at a level 1 point lower. Labor force statistics for March were released yesterday. Unemployment rate was recorded at 9.9 percent while labor force participation rate and employment rate stood at 48.6 percent and 43.8 percent, respectively. Let me present statistics for the same period in 2011 so that these figures make a sense: unemployment rate was at 10.8 percent, labor force participation rate at 49.0 percent and employment rate at 43.7 percent. Below are some striking developments:  At deadlock [More]
    An exploration into new monetary policy
    Fatih Özatay, PhD 07 June 2012
    The study stresses that the CBT does not have at its disposal appropriate tools to fulfill the objectives assumed in the late 2010 with the new monetary policy framework. How to design a monetary policy that focuses both on financial stability and price stability? Monetary economists and central bankers all around the world have been endeavoring to answer this question lately. The June issue of the journal İktisat İşletme ve Finans – Economics, Business and Finance covers studies that seek to answer this question. The studies covered in the journal assess the new monetary policy framework of the Central Bank of Turkey (CBT) with this perspective. On Tuesday, I talked about two out of five studies in the issue. Today I want to summarize the rest.  Institutional arrangements I authored the [More]