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    This was exactly what we needed now...

    Fatih Özatay, PhD26 January 2009 - Okunma Sayısı: 1276

     

    Global shock, and the big earthquake and then the global crisis and recession...
    We have been using these phrases since recently. However, we were talking about how Turkey needs to create a new wave of reforms for instance in most of 2007 and in 2006. You know, the reforms we used to call 'micro reforms' and we started to call 'second generation reforms' as we thought it implied the real meaning better. In professional terms, it was quite exciting to comment on these reforms. On the other hand, as the economists of a country that shockingly did not manage to understand the terms like 'stability', 'budget constraint' and 'disciplined economic policy' we were proud that the archaic times have passed and that it was time for saying new things considering the medium and long term.

    However, we missed that opportunity screaming at the top of its voice "take advantage of me" in 2007. We created tension in the country and altered the agenda with the presidential elections. After that, we pushed the country into the head-scurf disputes and we even turned the issue into something that cannot be pulled off. We missed the chance in 2007 considering the second generation reforms that can increase the potential growth rate and diminish the unemployment rate.

    The year 2007 was unfortunate also for another reason. There was a fiscal loosening to a certain extent. Primary balance fell down and fiscal balance rose at the same time. Though this loosening was not a major one, it brought the question 'what if' into our minds.

    The December data announced the week before revealed that the deterioration continued in 2008. The share of the central government primary balance in the national income was lower and the budget deficit was higher as compared to 2007. 2008 data considering the public sector as a whole are not known yet. However, the prospects signalize a significant fall in the share of the total primary surplus in the national income both in terms of the targets and in comparison to 2007.

    Yes, a number of economists suggested that to tackle the crisis, fiscal loosening to a certain extent can be introduced to be compensated in the future. I also suggested this so long as the loosening will be limited and the spending priority will aim at stimulating the domestic demand to the highest extent possible. Then, what is the problem about the mentioned loosening in 2008?

    This is the problem: We keep on saying that we are passing through unusual periods and thus we need unusual measures. These measures shall constitute an economic program with internal consistency. On the other hand, we only see piecework measures and a number of statements. To what extent these are consistent with each other?

    It is obvious that the fiscal loosening did not happen to take the economic measures required to decrease the severity of the economic contraction that seems inevitable for 2009. This is what we object at and feel sorry about. Let us put it differently: First the budget sources needed so much within the framework of a dynamic originating from 2007 are currently directed to areas that do not require immediate intervention. Second, the budget balance is deteriorating due to some measures in the end of 2008 claimed to be taken to tackle the crisis and we are not able to determine the necessity of these measures since they are not taken under the framework of an economic program with internal consistency. Third, the space of maneuver needed to introduce necessary measures in the future is narrowed due to the reasons stated above.

     

    This commentary was published in Radikal daily on 26.01.2009

     

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