For a while we are mainly hearing bad news. This implies that the growth estimations for 2010 involve downward error risk as the main scenario on which estimates that came to light so far are based assumed that developed economies would recover moderately. This assumption is involved, for instance, in the Medium Term Program introduced a couple of months ago. Since mid-November, I have been constructing some scenarios for 2010, tried to examine the exogenous conditions that will affect Turkey's economy and provided alternative growth estimations. My basis scenario also made such an assumption.

It is doubtless that the most prominent of the adverse news is from Dubai. From the day before the Festival eve, Dubai gave a 'festival present' to the whole world. State-owned institution named Dubai World applied to creditor agencies to postpone the payment of the foreign debt to become due in mid-December. Overall debt of the mentioned institution is said to be $59 billion. Dubai's debt is estimated to be around $80-100 billion a significant proportion of which is public debt. This is a considerable figure for Dubai as it corresponds to around 150-1200 percent of the national income.

The other side of the coin reflects the western banks lending to Dubai. Global financial crisis hit their countries like a bulldozer; they are trying to survive with unprecedented supports by central banks. It is unlikely that they can tolerate such adverse developments.  Of course we cannot expect an earthquake similar to the deep global financial crisis that merged after the bankruptcy of Lehman in September 2008. What is more, soon Abu Dhabi stepped in partially and declared that it will warrant a certain part of the debt.

I said that the deep turmoil that emerged right after Lehman's bankruptcy cannot be expected this time. However, if we leave behind the global crisis framework and take a more 'local' lens, there is a spooky word recalled after the Dubai problem: 'Contingency'. This word was brought on the agenda with the Asian and Russian crisis of 1990s. It refers to the contagiousness of a crisis in one country to other countries. Though an interaction in global scale is not a point of issue, 'similar' countries will be affected from this. The issue is 'local' in this regard. What is implied by similarity is that the countries in question have vulnerabilities to some degree. So it is useful to be cautious.

Regardless of whether or not the neighboring emirate Abu Dhabi helps, there is no doubt that this development in Dubai is not pleasant considering the global credit market. Euro-zone credit developments declared by the European Central Bank were also unpleasant independent of the developments in Dubai: in September, credit contraction in euro-zone was faced compared to the same period the year before. As figures for October announced last week suggest, the tightening continues. Moreover, European Central Bank declared the results of the survey aiming to get the opinions of creditor agencies: the results also indicate that the rigidity in credit market continues.

This commentary was published in Radikal daily on 30.11.2009