How shiny is Turkey’s economy?
Fatih Özatay, PhD
11 January 2014
If the below table is considered an indicator of how Turkish economy shines like a star, I am really concerned about the future; because if so we are toast! I am sure you remember the five countries which were expected to be hit the most by the Federal Reserve (FED) decisions: Brazil, Indonesia, South Africa, India, and Turkey. It is quite informative to compare these five countries on fundamental macroeconomic indicators especially when you add a “control group” to the picture. Mine will include China, Korea, and Russia, that is, the BRICKs not among the “Troubled Five”.
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Turkey in the age of current account reversals
Güven Sak, PhD
11 January 2014
We appear to be living in an age of current account reversals. Just have a look at the graph below, taken from a TEPAV study. If you take both the current account surplus and deficit countries, i.e., top 10 from each side, there is a convergence in the past decade. That makes it a period of current account reversal – meaning less macro imbalance in the World. Analysis shows the growth impact of the current account surplus reversals is more benign than that of current account deficit reversals. Turkey has always been, and still is, a current account deficit country. There are countries that took measures to lower macro imbalances and those that did not. Turkey belongs to the second group.Current account reversals in the highest 10 surplus and highest 10 deficit countries (as % of G
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If you don’t have a car, you can’t ride a bike in Turkey
Güven Sak, PhD
10 January 2014
While Turkey has yet to deal with the issues brought by the industrial revolution, the questions raised by the ICT response are already waiting to be answered. The industrial revolution changed our lives entirely. Have you ever thought about it? We first settled in urban areas. Waste generation increased. In 1900, when only 13 percent of the population, corresponding to 220 million people, lived in cities, daily waste generation was around 300,000 tons. As of 2000, the number of urban residents reached 2.9 billion accounting for 49 percent of the world population and the amount of waste generated increased to three million tons per day. The World Bank revised its estimate up to 3.1 million tons per day and the number is expected to reach six million by 2025. This is congruent with a 5000
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It is not necessarily trivial
Fatih Özatay, PhD
09 January 2014
Given the current environment, discussing this detail might seem trivial; yet it is important to consider tiny details when forecasting economic prospects. Industrial output index figures for November are released: industrial output grew after the fall in October. Such monthly fluctuations are not critical; we rather should focus on longer-term trends. Industrial output growth rates (percentage) in January-November period were 10.7 in 2011, 3.1 in 2013, and 2.7 in 2013. The evolution of the rates throughout the year suggests that output growth has shown a declining trend until the late 2012 and moved up slightly until November 2013.
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Even sharks in Australia are on Twitter
Güven Sak, PhD
07 January 2014
We have recently realized with the Edward Snowden case that security organizations have been using a gigantic set of data about our lives without any restriction. I guess I saw it in an Australian paper the other day. Australia is a weird place; it has no interest in the rest of the world. Australian papers are like Turkish ones; it is impossible to find anything about the world on the front page. They have other interesting stuff, though. According to one article, you can follow on Twitter where sharks are. In other words, Australian sharks are now on Twitter!
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Enriching the monetary policy framework?
Fatih Özatay, PhD
07 January 2014
Enriching the framework does not mean – I hope my former colleagues at the Central Bank won’t be offended – making a mess of it. For now, let’s put aside the developments since corruption probe of 17 December and focus exclusively on the hike in the exchange rate due to the Federal Reserve (FED) decisions, which affected Turkey along with some other emerging market economies. There is no problem if a hike in exchange rate is acceptable under your economic policy. If not, the economy management has to take counter-measures. But keeping interest rates below the inflation is not the appropriate measure for a country in which current account deficit is high, is a major concern and is accepted to originate from consumption growth.
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It has become even more tangled
Fatih Özatay, PhD
04 January 2014
With saving instruments such as deposits and bonds having no real return, consumption was encouraged. Rumor has it that 100 truthful economists, each from a different country, were once summoned and asked to answer a simple question:
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Turkey needs a fiscal rule
Güven Sak, PhD
04 January 2014
Tapering has revealed the vulnerability of the Turkish economy. What is Turkey’s problem? The current account deficit is going to be too high, the growth rate is going to be too low. You don’t need a Ph. D to know that is not sustainable. The Turkish economic policy makers are very much aware of this vulnerability, if you ask me. That is why they are taking a series of measures to limit credit card expenditures. The new regulation would limit the ability of the consumers to pay for purchases in equal installments in the coming months. In other words, it limits borrowing from the future. However, I find this to be palliative attempts at controlling the abhorrent level of the current account deficit. We have a structural problem here. Let me phrase it this way, “It’s the fiscal po
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Shopping malls are now the world’s biggest buildings
Güven Sak, PhD
03 January 2014
I started with shopping malls and digressed to corruption and the parallel state. I feel that I should not go any further. The biggest building in the world is a shopping mall. The New Century Global in Chengdu, Sichuan, in China has a floor space of 1,750,000 square meters. Currently the biggest shopping mall in Turkey is about 175,000 square meters; that is, a tenth of the New Century Global. Of the 1,750,000 square meters, 400,000 is devoted to the shopping mall, while the rest is a common area composed of a hotel, an artificial beach, a zoo, and a picnic area. The rule is, the larger the common area is, the more customers the mall will have. It is reported that the New Century global can accommodate the Sydney Opera House 20 times, Vatican four times, and the Pentagon three times. It
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Confessions (2)
Fatih Özatay, PhD
02 January 2014
Net inflows to Turkey, which averaged a monthly $10 billion in the first four months of the year, declined to one fifth in the following five months About a month and a half ago, on November 23rd, I wrote a commentary titled Confessions (1). It was about a piece I had written back in the late 2012 which presented my baseline scenario for the Turkish economy in 2013. I said that the scenario did not involve any particular reference to the Federal Reserve’s (FED) third quantitative easing that considerably affected the Turkish economy starting in May 2013. So I added “It is time for self-criticism. But please hear my version of story first and then decide. To be continued soon.” Actually it is quite weird that “soon” came only a month and a half later, especially given that I write three pie
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