Another slap in the face of the global credit market?
30 November 2009
For a while we are mainly hearing bad news. This implies that the growth estimations for 2010 involve downward error risk as the main scenario on which estimates that came to light so far are based assumed that developed economies would recover moderately. This assumption is involved, for instance, in the Medium Term Program introduced a couple of months ago. Since mid-November, I have been constructing some scenarios for 2010, tried to examine the exogenous conditions that will affect Turkey's economy and provided alternative growth estimations. My basis scenario also made such an assumption.
Protecting the poor: How?
29 November 2009
Global financial crisis has underlined once more an important fact: Credit flows from financial to real sector moves to a large extent along with the volume of economic activity. When the economy is growing rapidly, credit volume expands rapidly due to the prevalent optimistic climate as both appetite of banks to extend credits and credit demand by corporate sector and consumers increase. On the other hand, when the economy is in rapid contraction, credit volume also falls down. In macroeconomic terms, credits come to a halt exactly when they are needed to stimulate demand.
Need for automatic stabilizers
26 November 2009
On 29 September, TEPAV, the World Bank and UNICEF held a press meeting to introduce the report based on a survey carried out jointly. The findings of the Turkey Welfare Monitoring Survey as discussed in this press meeting were quite provoking. Adverse effects of the crisis were not limited with the rise in unemployment. Majority of the workers, especially those in informal jobs and in self-employment, stated that they experienced a drop in their income. Survey conducted in Adana, Ankara, Istanbul, İzmir and Kocaeli provinces indicated that households reported various mechanisms to cope with the outcomes of the crisis. For instance, almost half of the parents in poor families stated that they had to reduce the amount of food for their children.
What will happen in 2010? (2)
23 November 2009
Yesterday I presented the basis scenario that I think will apply in 2010. In brief the scenario said: Over the last quarter of 2009 and the first half of 2010, the volume of funds banks and firms transfer abroad will drop moderately. And by the second half of 2010 net foreign debt usage will be zero. Global risk appetite (measured by VIX index) will remain at the current level. In line with the framework I discussed in the previous commentary, foreign demand will rise moderately as of the last quarter of 2009 in comparison with the year before. Turkey's goods and services exports in real terms will rise slightly below 1 percent in each quarter compared to the same period the year before. During the last quarter of 2009 as well as over 2010, consumer loans will grow in real terms by sligh
What will happen in 2010? (1)
22 November 2009
Now it is time to answer "What will happen in 2010?" question. Before estimating the pace of growth in 2010, it is necessary to form some scenarios. Determining the pace of growth under each scenario is more significant than sticking to a single figure. First, let me say that I worked with a quite simple model. It is easy to make it more complex. However, I picked the easier way in purpose: I used this model before and provided growth estimations for 2009 under different scenarios. As the global crisis affected Turkey through four different channels, each of these channels must be included in the model so that a significant result would be reached. To put it differently, exports (foreign demand), net foreign borrowing (global liquidity and risk appetite), domestic credit volume and the con
How will Turkey’s exports be shaped?
19 November 2009
My last commentary ended with the question 'What will happen in 2010?' To answer this question, it is necessary to provide growth estimations under alternative scenarios. I also pursued a similar method for 2009 at the beginning of this year. I will use that model as well for 2010. However I will start this issue on Sunday; I have to work on it a bit further. If the dominant trend in the economy is about to be replaced with another one; i.e. in turning points, it becomes harder to make estimations as mixed signals are received. This is the main reason why I postpone dealing with the 2010 estimations to Sunday.
We are still transferring funds abroad
16 November 2009
Will Turkey achieve the widely expected positive growth in the fourth quarter of 2009? What will be the growth rate in the coming quarters? To answer this question, I addressed the changes in domestic credit volume yesterday. I will also go after the same questions.
Credit market gives mixed signals
15 November 2009
Generally accepted opinion was that we would see positive growth rates as of the last quarter of 2009 both for industrial production and national income. The main idea behind this was: we calculate the growth in the current period in comparison with the growth in the same period the year before. Turkey's economy contracted in the same period the year before. So, it is quite easy to achieve positive growth in comparison to that period. The second reason is that slow recovery was projected for developed economies as of the second half of the year. In that case, the volume of goods they imported from us would have been expected to rise.
Does the expected recovery take place?
12 November 2009
In the last two days, important production data was announced: September industrial production index and October capacity utilization ratio. These two series in general move together. I said in general because it is harder to calculate the capacity utilization rate in particular for some certain sectors as well as for factories that produce various commodities in one facility, as observable in almost all sectors. Therefore, small fluctuations in the capacity utilization rate might not give sufficient information. We had better examine larger fluctuations. When fluctuations above a threshold level are taken into account, the parallelism in the movements of the two indicators strikes immediate attention particularly as of 2007.
Turkey was affected severely, because...
09 November 2009
Compared with historical average growth rate, Turkey is one of the countries demonstrating the worst performance among countries in the same group. For instance, among the developing countries in the G-20 group, Turkey has the second worst performance in this regard following Mexico. It is estimated that in 2009, Mexico's growth will be 9.8 points below the historical average while this difference is estimated to be 9.5 points for Turkey. A similar trend can be observed for large Central and Eastern Europe economies. For instance, for a vast majority of the countries in these groups the mentioned rate stands below 5 points. Why are we facing such an adverse outcome despite all the steps taken after the 2001 crisis with the aim to ensure stability?