Are problems about FX finance easing?
12 April 2012
If Europe gets back into a chaos, we will initially face difficulty in meeting the FX requirement even in the case that the current account deficit eases. Critical statistics are announced one after another. Yesterday it was balance of payments figures for February. Here are some striking points: First, the current account deficit has decreased, though not at the desired level. Concerning cumulative figures for the preceding twelve months, the current account deficit had a record high $78.6 billion in October 2011. In February 2012, twelve-month cumulative current account deficit had a value of $75.3 billion. The cumulative of January and February demonstrate a $2 billion drop in the current account deficit.
Output growth slows down as desired
10 April 2012
Indicators suggest that industrial output growth has weakened and that this trend will most probably continue in March and April. Industrial output growth for February was announced. But first I want to talk about one “confusing” feature of industrial output growth figures. Generally, we assess industrial output with two methods. First, we make a year-on-year comparison, that is, assess the annual growth rates. Also, the Turkish Statistical Institute (TURKSTAT) has recently started to announce seasonally and working-day adjusted industrial output figures which allow month-on-month comparison.
07 April 2012
The main difference between the new and the old system is that the former incentivizes “strategic investments.” Last week I attended a conference at Uludağ University. During the session following the conference, some fellows explained how a one-paragraph amendment to the old incentive system affected the University. Here it goes: Around 150 engineers employed in an automobile company were working in the Technopolis in the University. The amendment to the incentive system cleared away the advantages of carrying out R&D activities in technopolises located in university campuses and encouraged carrying out such activities within factory premises. As a result, the engineers moved back to the factory. Which option is more beneficial concerning the economy is out of the scope of this commen
The battle was not over yet
05 April 2012
Growth has been slowing down, which will ease the CPI. Yet, CPI realization will most probably be significantly above the CBT target. Thank God, high inflation rates are now an old story for Turkey. Compared to its own inflationist history, Turkey has been enjoying low inflation rates since the beginning of 2004. But please note that compared to its own history were the rates low. For example, go to the webpage of the Central Bank of Turkey (CBT). At the bottom of the homepage, you will see the annual CPI targets and realizations since 2002. The lowest and the highest CPI rates between 2004 and 2011 were 6.4 percent and 10.4 percent, respectively.
Growth: Now “less unsustainable”
03 April 2012
Growth will not fall down steeply as it was once feared. 3-4 percent quarter-on-quarter growth ago seems more probable. Growth figures for 2011 were finally announced. With the 8.5 percent growth rate as of the end of 2011, the economy achieved high growth in two consecutive years. Given that the average growth rate for the 1960-2011 period was 4.5 percent, 2011 growth becomes even more remarkable.
As pessimism is rebounding...
31 March 2012
Between mid-January and March 21, the Central Bank of Turkey kept the short term interest rate at 7.5 percent. The rate currently reached 10 percent. Foreign trade figures for February were announced. Turkey’s exports are half in Euros and half in Dollars. These two accounts did not demonstrate a significant shift in trend in the recent months. Three-month cumulative results showed that the pace of year-on-year increase in exports in Euros had been decreasing since February 2011. This trend prevailed also in February 2012 (Graph 1). On the other hand, exports in Dollars have been increasing year-on-year by a firm 20 percent for the last six months.
Tommy Suharto, Saddam and Cairo's misery
29 March 2012
The authors’ answer as to where the fortune of Suharto’s son came from applies for other countries, too. Putra Suharto, known with the name Tommy, is son of former president of Indonesia. I do not know if he is still alive and fine; may God give him a long life. Tommy had a personal fortune which was estimated at $800 million by the mid 1980s and a fabulous playboy life, according to the book Economic Gangsters by R. Fisman and E. Miguel.
27 March 2012
The productivity of an organization is related to the level to which its employees have internalized its objectives. I am in Cairo to attend an academic conference. The theme of the three-day conference is “corruption and economic development.” Studies suggest that there is a close relationship between corruption and development. I think there is no need for much evidence to prove the correlation. The point will come clear when you think about roads which collapse soon after they were constructed or premises of public institutions which demolish during earthquakes. As international comparisons reveal, corruption negatively affects the international competitiveness of a country, as well.
Taxes and investment climate
23 March 2012
Minister Şimşek stated that if a tax rebate was to be launched, the first step would be to cut taxes on employment. I did not listen to Minister of Finance Mehmet Şimşek on tax rates; but I saw the headlines of his statements in the news. As far as I understood, he stated that if a tax rebate was to be launched, the first step would be to cut taxes on employment, followed by communication taxes.
Inflation must not be ignored
22 March 2012
Purchasing power of the lira almost halved since January 2005, when six digits were deleted. Year-end inflation target is 5 percent. The Central Bank of Turkey (CBT), however, estimates that inflation will reach 6.5 percent at the end of the year. In other words, the CBT expects a 4-point drop in inflation compared to the end of 2011. There is an agreement among analysts that inflation will decrease year-on-year by the end of 2012.