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Some observations on the MTP-2
Unless economic units address and evaluate these details, the MTP might turn into a poem of desires that reads “productivity will increase, and Turkey will grow rapidly”.
I will continue to “rumor” about the 2012-2014 Medium Term Program (MTP). My biggest concern about the MTP was that it estimated high levels of current account deficit for three years consecutively following the high current account deficit/GDP ratios in 2010 and 2011. With this perspective, five-year average of the current account deficit/GDP ratio reaches 7.7 percent by the end of 2014. This is the highest five-year average since 1990, the year when the capital movements were liberalized. According to the latest balance of payments figures, Turkey could not access net “resources” (borrowing) from abroad in August. However, in the first seven months of the year, the level of net foreign exchange (FX) inflows to Turkey was US$ 7.2 billion. Under the current global circumstances, this slump in net FX inflows is expected to continue. Of course monthly fluctuations can be observed, but this will be the base trend unless the global circumstances are improved. If so, how can Turkey maintain high levels of foreign borrowing required to finance high current account deficit? Otherwise, how can we attain the growth rates estimated in the MTP?
The MTP is similar to old documents
The second problem is that the MTP was written with a language similar to that we are used to see in past plan and program documents. Previous documents also used a similar language. I expected that the new MTP approach would avoid obscure expressions such as “will be done”, “will be ensured”, or “all necessary measures will be taken”. The text, however, is full of such expressions. In that case it is least likely that the MTP can fulfill its main function. How can the MTP reduce uncertainties if these expressions are not solidified, for instance if it is not explained how and when the mentioned measures will be introduced, implemented, which resources will be mobilized and what results are expected? You can say that this is a three-year program and there are other comprehensive technical documents to deal with such details. This might be correct. But do not you think that if that is the case, the supplementary technical documents should also be announced together with the MTP? As a precondition, such important details must have been addressed and identified in advance, of course. And I do not know whether this is the case despite however we would all want.
Unless economic units address and evaluate these details, the MTP might turn into a poem of desires that reads “productivity will increase, pollution will decrease, and Turkey will grow rapidly” rather than reducing uncertainties we face when taking prospective economic decisions. This can be done differently. The economics bureaucracy in Turkey can easily prepare a more persuasive medium term program.
Minister of Economy was not present
My third concern about the MTP was not about the essence but about the presentation. As far as I am concerned, Minister of Economy was not among the ministers and bureaucrats that announced the MTP in a press meeting. I might be wrong, of course. Or maybe the Minister of Economy was out of town on a mission. But, if otherwise, there is something odd, clearly. I think it has to do with the title of the Ministry of Economy. The naming of the ministry as “the Ministry of Economy” was criticized enough when the functions and affiliated units of the ministry were announced. The way the MTP was presented has proved once again that the criticisms were fair. There of course are concrete and credible targets in the MTP. These generally convey positive and realistic messages on fiscal policy: it is estimated that budget deficit, total public finance requirements and total public debt as a ratio to GDP will be quite low.
This commentary was published in Radikal daily on 20.10.2011