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    Can we focus on our work if we hold the elections right away?

    Güven Sak, PhD02 July 2009 - Okunma Sayısı: 1237


    We put our signature under another global "success" story. Turkey's economy has broken the world record of economic contraction in the first quarter of 2009. Contraction is a problem all around the world in this period; however no one has experienced such a significant contraction. Besides, there are economies that without a shame experienced growth in the first quarter of the year. So, why did Turkey encounter such a result? The relative stability ensured by the program implemented after the 2001 crisis coupled with the Customs Union agreement rapidly turned Turkey into an integrated part of the global economy. Now, however, we seriously feel the contraction. We wanted to be and become world citizens; and now we are paying the penalty. Doubtlessly, the rapid contraction in the European market, which we are a part of, also had a role with this respect. However, there is another reason behind this result: the inertia stemming from power struggle also has a role in bottomed out performance. Have you noticed that we are going through a period where administrators, busy with power struggle, fail to make any decision on areas that will closely affect our lives such as foreign policy, inner peace, economy, or positing Turkey in the global competitiveness map of the future?  Our problems will manage us as long as we fail to manage them. Things will not go on track much; but it will be some much fun. There will be a number of materials to watch and enjoy. The problem is not watching of course; but it seems that the only option ahead will be the holding elections. Can we focus on our work if the hold the elections right away?

    What did we say before? We said "I am currently feeling what the figures will tell you two months from now." And there is no doubt that the contraction rate announced two days ago is a figure of that type. It is related with what we felt yesterday. Then, will things will be very well from this point on? To begin with, it is certified that 2009 is a lost year. 2010 will be better than 2010. But will this recovery in figures be felt? No; unless the inertia disappears. This is the first point.

    And let's switch to the second point. Growth rate for the first quarter was announced. But export figures are announced each month by a number of different institutions. Export figures for May indicated around 40 percent of contraction. The downward trend continues since the beginning of 2009 without easing down. This is exactly the most important reason that differentiates the current crisis from the previous ones.  Before, firms recovered on exports in a couple of months following the emergence of each crisis, along with the impact of the exchange rate shock. Now there exists a trend in the opposite direction:  the first graph below shows this trend. Exports have been falling down of a cliff since the beginning of the crisis. We are faced with a situation we are not familiar with considering the previous crises (1994 and 2001). So, what does the continuation of the downward trend in exports in May mean? It seems that the contraction in the first quarter of 2009 is not only yesterday's news. It confirms that 2009 will be a lost year where the most pessimistic estimates will be realized. And this is the second point.






    Graph 1: Monthly change in exports as of the emergence of the 1994, 2001 and 2008 crises (%)

    20090706v01 1.520px

    Note: It is assumed that 1994 crisis started in January, 2001 crisis in February and 2008 crisis in July.

    Do we have a chance to experience a more rapid recovery in 2010? No, we don't. The first evidence for this is structural. Let us go on with the export example. Primary export partner of Turkey is the European Union (EU). Share of the EU in total exports of Turkey is almost 50 percent. Growth estimations for the EU countries suggest that the recovery in those countries will take time. Therefore, Turkey must not expect a rapid buoy in foreign demand in 2010. Efforts to change the export market of Turkey launched recently and desperately are not sufficient in terms of scale. The graph below shows the countries whose share in total exports of Turkey over the first five months of 2009 have increased and decreased the most when compared to the same period in 2008. As can be noticed, first ten countries (excluding Switzerland) whose relative importance in Turkey's exports have increased over the first five months of 2009 are located in the Middle East, North Africa and Asia. There is no doubt that this is a favorable development for the firms that directed operations there and for some regions of Turkey. For instance, it is a favorable development for the economy of Gaziantep and Kahramanmaraş provinces individually. This market shifting operation shows out dynamism. It is also seen that the majority of the export markets whose share in Turkey's exports have decreased are European countries. With an integrated approach; it can be assessed that the level of earnings falls short of compensating for the losses over the first five months of 2009. Turkey's exports to ten countries whose share have increased, as shown in the graph, have gone up by 3.2 billion dollars in the first five months of 2009 compared to 2008. On the other hand, exports to ten countries whose share decreased the most have gone down by 12.2 percent. What we earned is around 26 percent of what we lost. Thus, the third point is Turkey's exports cannot recover unless the EU market recovers.

    graph 2: Twenty countries whose share in Turkey's exports have changed the most over the first five months of 2009

    20090706v01 2.520px

    What does this mean? It means Turkey will not be the first country to recover from the crisis. It will follow what happens from behind. The fate of those who do not learn their lesson is the same anywhere around the world. This situation is a sad "mute and mold" example.

    So, what is that we learned? It is beneficial to take measures. Insisting on not agreeing with the IMF intensifies the crisis.  At this point onwards, governments' dependence on fake documents rises at most.


    This commentary was published in Referans daily on 02.07.2009