In June fall in industrial production has lost pace and realized at 9.7 percent making us happy. Industrial production has been falling since 2008 August; of course compared to the same period in the previous year.

Let us remember: Journey of contraction in industrial production has begun with 3.9 percent in August. Then, the contraction intensified gradually and in February production decreased by 25 percent compared to a year before. In March, the contraction was eased falling down to 20 percent. Contraction in April was quite close to 20 percent. As of June, it appears that industrial sector produces in average 10 percent less compared to the year before. Well, on the bright side, this is sort of a success; contraction by one-tenth is better than contraction by one-fifth.

Yes, such is joy. It can be relative sometimes. For those who definitely want to get happy, there also is a rationale. This should be underlined so that industrial production in June is posited on a perspective. If we are interested not in contraction but in growth rate far below the historical rate of growth, we will instantly see that economy has grown with a low pace in the second and third quarters of 2008: Second quarter growth is only 2.8 percent and third percent growth is even lower; 1.2 percent. Therefore, we are getting happy because current production level is not 'substantially less' but 'just less' compared to a production level, which is already increasing with a quite low rate. In short, in this side, there is nothing much to be happy about. Anyway, after all of the bad news we have been hearing for months; let us say this is something.

But, let us also observe whether or not there is something in the future giving us hope. Did we implement a program to tackle the crisis? No we did not. It appears that we wait for the economy to overcome the crisis relying on its own dynamics. So, what are the developments in factors determining this dynamic?

There is no evident recovery in foreign demand yet. Fall in exports is substantial. Only in July fall in exports was limited slightly compared to the same period last year: rate of contraction decreased from 40 to 27 percent. Pace of recovery of EU countries will also decide the destiny of Turkey's exports. Therefore, we should not rely much on foreign demand for production in the short term.

So, what about the credit market? Balance of payment figures for June does not indicate a change in level of foreign credits for corporate sector. And banking sector for the first after months is not a net foreign debt payer. There is a slight net credit inflow to the sector. And about the domestic credit market... As I also touched upon on my commentary on Sunday, fall in credit supply has ended but volume of credits does not increase for months. In other words, net of inflation; fall in credit volume continues. On the other hand, banks are converting gradually lower proportion of the deposits they collect into credit.

In this context, I cannot be hopeful about the near future. At the end of June and the beginning of July, I began to construct some scenarios for 2010 and 2011. The basis scenario was a 'spinning' scenario:  In the absence of a solid economic program, the economy would grow in 2010 mathematical purposes; but if we did not change the passive attitude, the picture appearing for 2011 would not be optimistic.

The mathematical purpose is: Assume that industrial sector only produces shirts. In 2008, you produced 100 shirts. In 2009, production fell to 80 shirts; so industrial production decreased by 20 percent. If you produce 84 shirts in 2010; industrial production grows by 5 percent. But level of production is still 16 percent lower compared to 2008!

In short, we will grow in 2010 even if we do not take any steps. For instance, export performance will buoy slightly. First estimates run by the economic model I also used for 2009 indicate around 4 percent growth in 2010. Now, it is your decision to be satisfied or displeased with this rate. But in any case, please remember that the real problem is about 2011.

This commentary was published in Radikal daily on 13.08.2009