What is the unchanging characteristic of Turkey's economy?

When you think about the most distinguishing feature of the year 2010 considering Turkey's economy, the radical change in the finance of current account deficit comes to fore by far. I will deal with this tomorrow. When you think about the constant feature of the economy in the year 2010, there appear a number of elements. Today let me talk about two of them. First is that it was a year where no step was taken to change the status quo. This is such an important element; but I will not talk further on this for now. The second will allow self-criticism; so let me begin with that.

It is hard to make forward estimates in economies where 'abnormal is considered as normal'. Turkey's economy also used to be in this group. Thank God, we made it to one upper league and become a more foreseeable country. To put it differently, Turkey 'had become' a more foreseeable country. The crisis did not allow us to feel the joy of being an economy 'where abnormal is not considered as normal'. Instead, it turned the whole world into a single economy 'where abnormal is considered as normal'. 

My estimation stands low below the realization
Title of my commentaries on November 22 and 23 2009 was: 'What will happen in 2010?' Following this assertive title I just make growth estimates. There are a couple of scenarios, all of which but the basis scenario are pessimistic. First one concludes as follows: "As you might notice, my 'basis scenario' is a bit optimistic in particular considering the assumption for domestic credit expansion. Under this scenario, 2010 growth will be between 3.8 and 4.9 percent." We now have the figures for the first three quarters; growth rate appears to realize at 7.5 percent. My estimation stands low below the realization. I made those estimates relying on a basic macro model. In this context, I formed different scenarios for some variables affecting growth performance (their value in the last quarter of 2009 and throughout 2010). On this ground, the model made some forecasts for the GDP and some sub-items.

There are two variables due to which my growth estimate stood below the realization: the movements in consumer loans and total credits as of the second quarter of 2009. Back than I assumed that the former will increase by 1 percent and the latter by 1.5 percent in each quarter compared to the quarter before. On the basis of this assumption, consumer loans and total credits turn out to have a rise by 6.1 and 4.1 percent (net of inflation) respectively by the end of the third quarter of 2010. What is more I also underlined that I stood across the 'optimists' concerning the estimated increase in credit volume. And here come the realizations: consumer loans increased by 17.7 percent and total credits increased by 24.2 percent. Another important variable considered in the model was the confidence in the economy (real sector confidence index) which also recovered more rapidly than I estimated.

Expansion of credits extended by banks recovering more rapidly than expected naturally has important impacts in that my growth estimation stood below the realization. I have been discussing this issue for some time now. The important question in this context would be whether or not the measures introduced by the Central Bank enable a slowdown in the credit supply. Tomorrow I will take a look at the radical change in the finance of current account deficit with the above lens. And I will try to answer the question above on Thursday. In short, in an effort to confess I ended up passing the buck to the Central Bank once again. Sorry for that!

This commentary was published in Radikal daily on 02.01.2011