To begin with, I would like to refer to the dual distinction I made months ago: the real sector and potential developments in global financial markets. With 'real sector' I mainly refer to the growth rates of big world economies which receive as a significant portion of Turkish exports. Different than other crises Turkey created alone, we are in an environment where we cannot make exports. This is one of the major reasons behind the fall in production. Therefore, it is important whether or not the economies of countries we export to will start recovering.

Even the most optimistic analysts argue that recovery will be delayed till the first months of 2010. In this sense, it is necessary not to be optimistic about 2009 in terms of export performance. As you might remember, on March 9, I referred to estimations on the rate of economic growth in 2009 based on some scenarios.

The basis scenario, inter alia other negative developments, assumed that export of goods and services would fall down by 9.8 percent. In this framework, under the most optimistic estimation 2009 growth rate would be minus 6.5 percent. On the other hand, if exports increased by 1.2 percent, growth rate would be minus 3.4 percent. To put it differently, 11 points of change in exports would lead to a 3 points rise in growth. It is not at all negligible. In short, it is necessary not to be optimistic about 2009 unless export performance recovers, which is not under our control. In other words, the impact of the policies we are to implement on rate of growth and employment will be limited. Furthermore, as I also tried to discuss below, to what extent these policies will be beneficial, is related to the second element given in the distinction above: What type of a path the global financial markets will go into in the forthcoming period?

I said 'the policies we are to implement'; is the inertia to disappear? It seems so: It eems that the most important change ahead is the agreement to be signed with the IMF and the loan to be received. The support of the US Treasury (administration) coupled with the enhanced IMF facilities; it seems that it will be possible to sign a loan agreement at a much higher amount than mentioned before. There is no doubt that this agreement as well as the loan to be received will enhance the confidence in the Turkish economy. This means the main trend of interest rates and in particular of exchange rate will be downward if there is no exogenous interference. Whether the confidence will be permanent and turn into consumption and investment is also related with exogenous conditions. Here, with 'exogenous' I refer to global financial markets. If we do not face any turbulence, the IMF agreement will ensure that the confidence in the Turkish economy has an upward trend.

However, there are people still pessimistic about global financial markets. In this case, we cannot be sure whether the confidence in our economy will be improved to an extent that will stimulate spending. Furthermore, enhancement of confidence is not sufficient alone as the fall in consumption and investment is also related to the tightening of domestic and foreign loan channel. There is no doubt that the enhancement of confidence has positive impact on the willingness to extent and receive domestic loans. Nonetheless, if we want to relieve this channel further, loan guarantee system must also step in. If the agreement to be signed with the IMF allows - which I believe must allow - the establishment of a loan guarantee system geared towards restructuring existing loan stock and providing guarantee for new loans, we can be more secure about the future of the economy.

Though all favorable options enumerated above take effect, we cannot expect the tightening in foreign loan channel to resolve overnight. As the global financial system has collapsed, the amount of funds we can access is limited even if we tidy up.

You see the picture includes numerous 'but, nonetheless, another thing to say, and so'. In fact, if written in an 'algorithm' they will make more sense. But, it will skip it and add a final point: Another thing is consumption falls down also because of the rise in the number of unemployed people and as the wages of the majority of employed people do not increase. We must expect that this situation does not change during 2009 unless policies to increase the demand for domestically produced goods are implemented. If you add these factors one under the other, it appears as a significant risk that Turkish economy will contract considerably in 2009 even an IMF agreement is signed.

This commentary was published in Radikal daily on 13.04.2009