Almost two thirds of the national income of the world (according to the development indicators of the World Bank) originates from two countries: the US and China. Thanks to the high paced growth performance of the US and China in the previous decade, world economy as a whole demonstrated a rapid growth performance. However, two developments announced the week before showed that nothing will be the same anymore. First was announced by the National Bureau of Economic Research of the US (NBER) and second by the World Bank. Let us see what were those about?

NBER "officially" announced that the US economy has entered a period of contraction as of December 2007. The duty of NBER is to make the official statement with this respect and it fulfilled its duty without wasting time. In the meanwhile, the World Bank announced the December 2008 report on the Chinese economy. The report revealed that the Chinese economy was slowing down though the impacts were not clearly observable yet. These developments have a meaning also for Turkey. Let us draw a couple of conclusions out of these developments so that no mistakes will be made and the anxiety rising in the business world will not be categorized as "crisis opportunism".

Let me start with the first point: In the upcoming period, the world economy will not maintain the usual pace of growth since both driving forces of the global growth have simultaneously started malfunctioning.  World economy has grown by 3.7 % in 2007. The growth rate will fall down to 2.6 % in 2008. In 2009, around 1 % growth is prospected. So, growth performance will almost fall to one-quarter. This will without a doubt affect Turkey. This is the first point to state.

And the second point: The world has not felt the contraction in foreign demand to a high extent, but will feel it in 2009. Total exports in the world economy increased by 7.4 % in 2007. Economic growth led to an increase in the demand for foreign goods. This rate is expected to fall down to 5.8 % in 2008. This implies that the impact of the foreign demand has not been felt much yet. In 2009 on the other hand, demand is expected to shrink by 2.5 %. Therefore, we have not observed a contraction in foreign demand, but we will observe it soon. Turkey makes exports to the European Union zone. This means, we are closely related with the market that has been affected by the problem originated in the US to the highest extent and that has responded to it first. If we add up the EU economy to the US and Chinese economy, it corresponds to ½ of the world economy. We have already felt the first phase of the impact here in Turkey. However, that impact will spread and deepen henceforth. For instance, China will now fell the contraction in the foreign demand more followed by the rest of the world.

Until today, countries that were developing while the Europe was contracting, i.e. the countries that were relatively peripheral to the world economy, were trying to maintain their performance. However, this is not sustainable. It will be wise to acknowledge in advance that contraction in foreign demand will deepen further in 2009. Under these circumstances, it shall be expected that the contraction in the international trade will also deepen further due to the contraction in the trade financing. And this is the third point derived from the second point.

So, in that case, what shall we expect? In that case, prudent traders have to pay regard to the future of their companies and take measures. However, it will be wise to expect that the measures traders are to take will backdate the contraction. But, it was not so in 2001. Let us observe the difference: Back in 2001, the corporate sector was aware of the "light at the end of the tunnel". Today, however, they are not. The corporate sector that was aware of the "light at the end of the tunnel" decided to assume a medium-term attitude to extend the losses over the medium run rather than compensating for the lost in 2000-2001 period at a single time. Back then, there was a belief that the medium term is "the future that is not too far away". There existed a set of measures. That set of measures as a whole played a confidence-rising role. We were not hopeless about the future. This is exactly what is missing today.

So, today individual measures to be introduced by individual economic actors will not be beneficial for us in cumulative. The ones with money will be reluctant to spend it because of future concerns. The corporate sector will alter the course of business to cut down costs. This is exactly what market failure refers to. The individual measures that are in our best interest are not necessarily in our best interest in cumulative. The market cannot ensure this coordination; this is the purpose and target of the economic policy.

This is the current situation: Today, there exists no sign indicating how and when we will survive. The only thing we observe is empty talks by the highest-degree officials. Therefore, this is the common question to ask: Is it possible to manage a company relying on empty talks? Is it possible for the young people to plan their carriers relying on empty talks? Can empty talks open new horizons for us? No.

The problem of Turkey is that now, everyone recognizes empty talks. This is where the tragedy lies. Figures show the reality. Life will soon teach those who are not able to see the reality the meaning of the current developments.

This commentary was published in Referans daily on 06.12.2008