The Medium Term Program estimates lower GDP growth for 2013 and 2014 compared to the previous program.

After a series of “emotional” commentaries, today I will go back to figures. I am afraid some of my readers find such pieces “dry.” But someone has to assess these developments as they turn out to affect lives of us all. I promise I will keep numbers at minimum.

First the industrial output figures for August: industrial output declined year-on-year. Such fall was not observed in preceding months in 2013, but I will neglect monthly figures as I always do. From a broader perspective, the picture is not that unfavorable, but it still is to some degree: in the first eight months of 2013, industrial output increased year-on-year by 2.3 percent. The year-on-year output growth was stronger in the same period in 2012.

The latest foreign trade figures gave hints of such decline: in August non-gold and non-energy imports which move in the same direction with production due to imported inputs hardly increased year-on-year despite the remarkable improvement in the first seven months of 2013.

There is no harm in a small slowdown in output growth following a year of high growth. Indeed, in most of the cases such slowdown can even be advantageous as it to some extent prevents overheating which otherwise might cause bigger troubles. Nevertheless, this was not the case this year as GDP growth in 2012 was less than half of the average GDP growth since 1950. Employment reacted to this immediately; rates have gone up early this year.

From this perspective, it is worrisome that year-on-year output in the first eight months of 2013 was lower than that in 2012. And here comes the “but”: in the first half of the year, GDP growth was higher compared to 2012. How can GDP growth be relatively higher when industrial output growth was relatively lower? It can, actually. First of all, industrial output figures are available for the first eight months of the year while GDP growth figures are available for the first six months. Second, industrial output is not the only component of GDP. And thirdly, since late 2012 public sector investments have been rising rapidly. Hence, the major contribution to GDP growth is made by public sector investments rather than private consumption and investment.

So, we cannot conclude that GDP growth will be relatively lower just because industrial output growth in the first eight months was weaker. On the other hand, we have to note that satisfactory and sustainable growth cannot be achieved relying solely on public sector investments.

The main factor that lowers expectations for GDP growth is indeed evident: the access to foreign finance for countries like Turkey will be more difficult than it recently used to be in a couple of years ahead. This is also why growth forecasts were lowered in two important documents released this year: the Medium Term Program estimates lower GDP growth for 2013 and 2014 compared to the previous program. And the IMF revised down its growth forecasts for the same period for emerging market economies as well as for the global economy.

This commentary was published in Radikal daily on 10.10.2013